Rebooting your finances after a challenging year or two may make you panic about how to start. With collection calls and letters on the rise, you may feel you have no plausible way out. Bankruptcy may become the solution to your financial woes.
The bankruptcy process is no longer elusive or shameful. Many people like you find themselves stuck under a heap of bills after a sudden job loss or medical event. To determine whether bankruptcy may work for you, take some time to get a basic idea of what it is.
What type of bankruptcy to file?
There are two options of bankruptcy an individual is eligible to file. Each chapter has requirements and ways of handling debt. To file under Chapter 7, you need adequate assets to liquidate to help pay back some of the debt. Chapter 13 requires a retooling of your finances to find a payment plan that you can stick to for no more than three years.
What does bankruptcy do?
The purpose of bankruptcy is to help you get back on your feet. It accomplishes this by paying back some debts and wiping the rest away. A court-appointed trustee reviews your finances, assets and income to determine how to proceed. Debts with collateral take priority, such as homes and vehicles. Unsecured debts, such as credit cards, are last in line for payment. The trustee decides how to maximize your payments to eliminate as much debt as possible. A judge discharges applicable debts if you stick to the trustee’s plan.
If you choose bankruptcy, you may become free from the burden of crushing debt sooner than if you try to go it alone.