Are you considering filing for bankruptcy, but feel uncertain about the specifics of what it means, and where to start? Bankruptcy can be a great option to help individuals obtain a fresh start on life with less debt dragging them down. Below are some basic explanations about what bankruptcy is, telling circumstances that bankruptcy might be a good option for you, and the benefits that can be reaped from filing:
What is Bankruptcy?
Bankruptcy is a legal process where individuals and businesses in such a point of financial difficulty that they cannot repay their debts as agreed can obtain a fresh financial start.
- Bankruptcy eliminates all or a portion of existing debts and/or stretches out payments on the debts under the protection and supervision of a court.
- It can protect creditors by sharing equally in whatever payments the debtor can afford to make.
What are the Benefits of Bankruptcy?
Bankruptcy is not always the best option, but there can be several benefits in choosing to file a bankruptcy.
- It stops credit harassment and debt collection, including garnishments and seizures.
- It discharges certain unsecured debts entirely.
- It rearranges certain debts into more affordable repayment plans.
- It protects certain assets from foreclosure or repossession.
- It can help to rebuild a damaged credit score.
When Should You Consider Filing for Bankruptcy?
The following are signs that bankruptcy might be a good option to help you:
- You are more than one month behind on your mortgage or behind on your vehicle loan and unable to catch up.
- You are unable to meet your basic monthly expenses (groceries, housing, utilities) without using credit or taking high interest loans to make your expenses.
- You’ve had a major loss of income or unusually high increase in expenses such as medical bills.
- You have tax debt that can’t be paid off within 12 to 24 months.
- You have received notice of home foreclosure or car repossession.
Chapter 7 vs. Chapter 13 Bankruptcy: Which is Right for You?
The bankruptcy code has multiple forms or chapters of bankruptcy, depending on the situation. The two most common bankruptcy chapters are:
- Chapter 7: People with overwhelming debt can use this to try to discharge most or all of their unsecured debts at once.
- Chapter 13: People with heavy debt but reliable income can use this to reduce their debt through a carefully created repayment plan.
When Should You File for Bankruptcy?
Several considerations may go into the timing of when to file for bankruptcy.
- The status of any domestic support obligation.
- Credit charges of $600 or more within the past year.
- Money given to family or friends in the past year, or is anticipating receiving (or recently received) an inheritance.
- Property transferred to anyone in the past four years.
- Any car loans within the past six months.
If you think that bankruptcy might be a viable option to help remedy significant financial strain in your life due to debts, there is no harm in contacting our firm to discuss your situation with one of our knowledgeable bankruptcy attorneys. Our consultations are free of charge and designed to help you find answers to your questions, and start identifying the best path forward toward a better future. Call our office at (503) 227-0200 to get connected today.
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