It’s hard to admit that a financial situation has gotten out of control. But sometimes bankruptcy is the right choice. The fresh start available after a time spent in bankruptcy is alluring after the stress of calls from creditors and the inability to get loans at usable rates.
There are two major options for personal bankruptcy. Chapter 7, often known as liquidation, involves a trustee taking control of a person’s remaining assets with some possible exemptions like homes and other things essential to a standard of living. This is often the choice for people facing a lot of debt without a lot of income.
Chapter 13 involves a reorganization of debts, usually resulting in a payment plan completed over a matter of years. This is a more likely and often more attractive option for people with a lot of debt but a high expectation of income that will allow them to make their payment plans.
Payment plans are often completed within three to five years. A person may emerge from bankruptcy and reclaim their credit if this process satisfies all their creditors. This may also prevent a foreclosure or other form of loss of property that is not a protected homestead or other preserved asset during bankruptcy.
Anyone considering bankruptcy or another form of debt relief should consider legal representation. An attorney can work with debtors to consolidate their debts or creditors to find out what they will accept in bankruptcy. A lawyer may also file the appropriate forms for bankruptcy if it turns out that it is the best option.