It can happen to even the most fiscally responsible person. Sometimes a financially catastrophic event occurs -- a serious illness, a job loss, a divorce or another major life event -- that makes it difficult if not impossible for a person to pay their bills. It is not pleasant to be in a situation where a person has to decide which bills to pay (or not pay) and still keep food on the table and a roof over their head. Fortunately, people in Texas and across the nation who are drowning in debt may be able to file for bankruptcy.
One option for filing for bankruptcy is Chapter 7 bankruptcy. Last year, over 490,000 individuals filed for Chapter 7. In this type of filing a person's property is liquidated and the proceeds are used to pay their creditors. After this the court will discharge many of the person's debts. People may worry that they'll be left with nothing after a Chapter 7 filing, but there are exemptions for certain pieces of property that will not be liquidated.
Some debtors, on the other hand, may choose to file for Chapter 13 bankruptcy. In fact, last year over 296,000 individuals filed for Chapter 13. Instead of having their property liquidated, in a Chapter 13 bankruptcy the court will formulate a plan for the debtor to pay back his or her liabilities. This repayment plan will be managed by a bankruptcy trustee. These plans in general last around three to five years.
Of course, there are lasting effects when it comes to filing for bankruptcy. A bankruptcy filing will show up on a person's credit history for as many as 10 years. This might make it more difficult to get credit during that time. Also, if a potential employer, landlord or insurance company runs a credit check, they will be able to see that that person has filed for bankruptcy in the past. Nevertheless, even these things can be overcome with time and responsible spending. In the end, filing for bankruptcy may be the lifeline a person needs to get back on their feet financially.
Source: Yahoo! Finance, "Expert: Here's when you should consider bankruptcy," Nov. 10, 2017