The realization that you can’t pay all your bills with your income is a major hurdle. Dealing with this type of financial challenge can lead to considerable stress. If you come to the realization that you just can’t handle the debts any longer, you may want to explore your options.
One option that you have is filing for bankruptcy. You’ll have to determine if Chapter 7 or Chapter 13 is the type you’ll file. There are significant differences between these two, but they all result in you having a fresh financial start.
Chapter 7 bankruptcy
A Chapter 7 bankruptcy is informally known as a liquidation bankruptcy because the trustee has the option of liquidating non-exempt assets to pay off debt. You won’t have to make payments out of your paycheck.
Chapter 13 bankruptcy
A Chapter 13 bankruptcy is known as a wage earner’s bankruptcy. In this type of bankruptcy, you will make regular payments to the bankruptcy trustee. Those payments will be used to pay creditors.
Qualifications and protection
Both types of bankruptcy have specific requirements, so it’s critical to determine which you qualify for. Your creditors aren’t likely to receive full payment for the debts you owe because they’re paid following a specific method set by law. Because of this, the court will issue an automatic stay to prevent creditors from contacting you in an attempt to circumvent that order.
Filing for bankruptcy is a complex undertaking, so it’s critical to ensure that you understand your rights and responsibilities. Working with someone familiar with these matters can help you throughout the process, starting with proper preparation.