Talking about finances is often not an enjoyable topic. This is especially true for those dealing with debt and financial hardships. When debt becomes overwhelming, it is not always easy to open up and discuss one’s options when it comes to addressing and resolving debt problems. However, there are real debt relief options available, and it is important one explores the bankruptcy process and how it might benefit them.
The decision to file for bankruptcy can be just as complex and multi-faceted as the process. Therefore, one should understand what the process entails and the differences between the filings one could initiate. For many, erasing their debt appears to be the best solution for them. However, before one files for a Chapter 7 bankruptcy, it is important to understand how it compares to the other most common type of personal bankruptcy filing, which is Chapter 13.
The biggest positive for a Ch 7 bankruptcy is its ability to eliminate all or nearly all of one’s debts. However, this means that any property that meets the non-exempt qualification will be used to pay off any debts. But this also means that if one does not have this type of property, such as a home or vehicle, then a lender is out of luck.
A Chapter 7 bankruptcy can truly offer a fresh financial start; however, it does impact one’s credit score for several years. Additionally, anyone considering this type of bankruptcy must be low income in order to qualify for filing.
In contrast, a Chapter 13 allows one to keep certain property, such as a home. Additionally, most filers will qualify and they will take less of a hit on their credit score. But this type of bankruptcy is a liquidation, which means that a repayment plan will be approved for the court and typically paid over five years.
It is not easy to make the decision to file for bankruptcy. However, when one takes the time to become well informed, this can provide some piece of mind. Seeking legal guidance can help ensure one is aware of their rights and what steps he or she can take to resolve his or her debt problems. Ultimately, this could aid in one obtaining a fresh financial start.