If you’ve exhausted all other debt relief options and still can’t find anything that would save your finances from overwhelming debt, declaring bankruptcy may be your only alternative. If bankruptcy is your only alternative, you’ll want to make sure you file in a way that will put you on a path to a better financial future in the future. To accomplish so, you must make well-informed decisions at each level of the filing process.
You can pick between two types of bankruptcy petitions. A Chapter 7 bankruptcy petition is a request to the court for a total discharge of your obligations, with any existing assets used to pay off the debts. A Chapter 13 bankruptcy petition establishes a court-approved payment plan over the following 3 to 5 years to pay off a portion of your debt. Apart from partial payback or a total clearance of your debts, there are further variations between the two filing alternatives. A Chapter 7 bankruptcy will not protect you from losing your house to foreclosure, but a Chapter 13 bankruptcy may help you avoid it. Because a Chapter 13 bankruptcy filing includes a partial repayment of your obligations, you will be assigned a trustee to whom you will transfer payments, and who will then distribute the funds among your creditors. In both circumstances, creditors are required to cease all collection efforts and are barred from pursuing further legal action against you. Continue reading to find out when is the best time to file for bankruptcy.
Divorce
For those who have been through a divorce, the revelation that divorce is not the leading cause of bankruptcy may come as a surprise. Those who have never been through a divorce may be startled to learn that divorce is one of the leading causes of bankruptcy. Divorce, when viewed objectively, certainly imposes financial responsibilities to both parties, but this is especially true in the event of child custody disputes. Both parties’ legal fees are increasing. The household that previously had only one set of expenses suddenly splits and is accountable for two sets of expenses, typically with little change in overall income.
Addictions
Some surveys reveal that addictions (ranging from gambling to substance misuse) cause only one out of every hundred personal bankruptcies; everyone realizes that self-reported addictions are frequently underestimated. Unfortunately, filing for bankruptcy looks to be more of a bandage than a treatment in such cases.
Medical
Unpaid medical bills can be a costly burden, leaving a long-term record on your credit report and bringing debt collectors to your door. Medical bills can be a deterrent for patients who are unwilling to seek treatment. Declaring bankruptcy can be a good option to get rid of medical debt, but it comes with a lot of drawbacks. According to TransUnion, Chapter 7 bankruptcy can stay on your credit report for up to ten years. This could make obtaining credit, such as a home or school loans, more difficult.
The primary goal of filing for personal bankruptcy is to protect an individual’s or family’s assets, which might range from real estate to vehicles to regular earnings. Creditors and lawsuits are generally prevented from foreclosing, repossessing, or garnishing these assets as a result of this protection. To assess all of your choices, speak with a bankruptcy attorney.
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