Is Bankruptcy the Solution for Your Overwhelming Bills? Here’s What You Need to Know

If your bills become overwhelming, personal bankruptcy may be an option. Bankruptcy essentially wipes out much of your existing debt, providing you with a clean slate. Bankruptcy ends debt collection, wage garnishment, and harassing phone calls from creditors. However, there are some drawbacks to bankruptcy. Plus, not everyone qualifies for it. So, it is important to learn more about bankruptcy before making your decision.

Chapter 7 bankruptcy is a popular option. People like it because it does not require people to repay their creditors. It is also one of the fastest forms of bankruptcy. However, it is not available for everyone. People who earn too much money are ineligible for Chapter 7. In addition, in Chapter 7 bankruptcy, you cannot protect your home from foreclosure or your vehicles from repossession.

Chapter 13 bankruptcy requires debtors to repay a portion of their debts. The bankruptcy court must approve the bankruptcy plan, which generally repays each creditor a portion of the amount that is owed. Therefore, it does not offer the same clean slate as Chapter 7. However, it does preserve some of a debtor’s rights to their personnel property. Chapter 13 can prevent home foreclosure and vehicle repossession. It may even allow you to reduce the amount you owe on these secured debts.

Many people think of bankruptcy as a last resort. That is because bankruptcy has a negative impact on your credit score. However, slow-pays and no-pays also negatively impact your credit score. Furthermore, debt can be a spiraling process, and if you are unable to pay your bills now, late fees and interest mean you will probably only get further behind. So, for many people, bankruptcy actually helps them repair their credit faster than continuing to struggle with bills.

In addition to personal bankruptcy, businesses can also file for bankruptcy. Many small businesses struggled after the mandatory Covid-19 closures. Even those that survived the pandemic may have found themselves closing in on the aftermath. Small business owners can use bankruptcy to minimize their personal liability for business debts.

There is a reason bankruptcy laws exist. They help people escape from snowballing debt and get a fresh start. They also help creditors, who may be more likely to get repaid under a Chapter 13 plan than if they just wrote off the debt.

If you want to learn more about bankruptcy, you can speak with a bankruptcy attorney. They can assess your individual circumstances and discuss whether bankruptcy is right for you.