There are many reasons why people find themselves facing overwhelming debt, especially with the upheaval of the past couple of years. The loss of a job, medical debt or an unexpected occurrence can quickly cause your financial stability to collapse, leaving you wondering if bankruptcy might be the best choice.
Advantages to bankruptcy
There are many benefits to filing for bankruptcy. While it cannot eliminate all types of debt, it can get rid of things like credit card debt and medical bills.
Creditors are legally required to stop contacting you after you file for bankruptcy, freeing you from the stress of creditor harassment.
Once your bankruptcy is complete and your qualified debt is gone, your anxiety level may decrease significantly. You will have a clean financial slate and be ready to begin anew. If you are worried about losing your home, there are ways to file for bankruptcy and still keep your home.
Disadvantages to bankruptcy
However, there are some downsides to bankruptcy, as well. Your credit score will be negatively affected, and you may have a harder time borrowing money or purchasing a house for several years in the future.
This doesn’t mean you should not file. It means that you should thoroughly analyze your financial situation, weigh your different options and make the best choice for you. A bankruptcy attorney can provide you with valuable advice.
Chapter 7 or Chapter 13?
The two main types of bankruptcy for consumers are a Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 bankruptcy completely eliminates all qualifying debt, while a Chapter 13 bankruptcy involves a payment plan over 3 to 5 years.
The decision to file for a bankruptcy should not be taken lightly. Before making your decision, try contacting your creditors and see if they will work with you on a payment plan.
Sometimes creditors are not receptive to payment arrangements. Even if they are, the number of creditors and amount of debt may make payment plans impossible, even with creditors who are willing to work with you.
If you do decide to file for bankruptcy, the process involves various steps and requirements. Having guidance through the process can help.