Millions of people in the United States suffer from financial problems at some time in their lives. When your money flow situation becomes too challenging, you may want to consider filing bankruptcy. Bankruptcy allows you to get a fresh start so you can resolve your financial difficulties and begin building your credit again. There are both advantages and disadvantages to filing bankruptcy, and it may not be the best solution for everyone. It is helpful to understand the types of bankruptcy and the pros and cons of each type so you can make an educated decision.
Two Types of Consumer Bankruptcy
There are two main types of bankruptcy that you can choose between, depending on your finances and circumstances. Chapter 7 is a discharge of your debts while Chapter 13 is a reorganization of debts. Both have some advantages and disadvantages.
Chapter 7
Chapter 7 is also called liquidation or straight bankruptcy. With Chapter 7, you will need to give up property to repay your debts. You will liquidate your assets and make payment to your creditors. There are several exemptions, but generally, you must repay the majority of your debts in order to complete this type of bankruptcy. You may be able to negotiate reduced payments with creditors.
Chapter 13
Chapter 13 bankruptcy gives individuals a way to reorganize debt through a payment plan that will resolve your debt over a period of a few years. Chapter 13 is often the preferred option because it allows you to keep your possessions and assets. You must qualify with a regular income in order to file Chapter 13 bankruptcy.
Both types of bankruptcy involve a court filing. The court oversees the process and ensures that you resolve your situation in order to complete the process.
Should I File Bankruptcy?
You should not make the decision to file bankruptcy lightly. Bankruptcy will have a large and lasting impact on your finances and credit history. You should consider bankruptcy as the last resort when you are struggling with financial problems. That being said, you do not need to wait until you are destitute to file bankruptcy.
Bankruptcy provides consumers with some protections and rights that will be of benefit. As soon as you file bankruptcy, your creditors are no longer allowed to contact you to harass you for payments. This can give you a better feeling because you are not overcome with phone calls, emails, and threatening letters.
It is best to speak to a qualified bankruptcy attorney before you make the decision to file. Bankruptcy will give you a financial fresh start, but it comes with a price. You will have a permanent blemish on your record and it can take years to rebuild your credit over time. The process of rebuilding your credit is a long and arduous one that will take years to accomplish. Bankruptcy is a choice that you must make to change your lifestyle and spending habits. You can learn how to live more comfortably within your means so you do not end up in the same position again.
Bankruptcy is a decision that you can make based on your particular details. Talk to one of our experienced bankruptcy attorneys to discuss the options that are available. Contact us at Moen Sheehan Meyer, Ltd. today for a free initial consultation.