In the USA and the majority of the capitalist world, bankruptcy is considered as a kind of a taboo topic. People who file for bankruptcy are often looked down on, seen as unable to maintain their fiscal capabilities and considered a failure. However, bankruptcy can actually serve a very important and noble purpose if used correctly.
Bankruptcy attorneys like https://www.thebklawyers.com/ can help people who have, for whatever reason, lost the reins of their financial situation to regain control of their lives and finances without the threat of everything taken away by the creditors. More often than not, people who file for bankruptcy aren’t irresponsible people, but people who have found themselves in unexpected unfavorable situations and they simply need a break from the pressure.
Reasons for Bankruptcy
Some of the most common reasons for filing for bankruptcy are situations which we can’t affect. A sudden illness which requires extended medical leave, as well as a lot of money to treat, can leave your finances in ruin. Even though you have eventually overcome the illness and recovered, your financial status is now less than ideal.
Unemployment or reduced hours at work are also a common source of poor financial status which may eventually lead to the need to file for bankruptcy. A lot of our amenities depend on regular monthly payments, including mortgages, car payments, and a lot of other things. If you are unable to pay these for a few months, it may still be possible to catch up. However, after a while the debt becomes so big that bankruptcy may be the only way out of the tricky situation.
Divorce is not only difficult emotionally, it can put a serious strain on the financial situation of the participants. Not only can you lose your house in the process, but you may end up having to pay the legal fees, child support, and possibly other things as well. If you weren’t financially prepared for that impact, it may send your debt spiraling out of control.
Chapter 7 Bankruptcy
If you have decided that you need to file for bankruptcy, as a last resort option, it is time to figure out what kind of bankruptcy is best suited for your needs. You can consult bankruptcy professionals and attorneys to help you figure out. The most common two types of bankruptcy available to the general public are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy enables you to keep a lot of your property while still giving you protection from the creditors. You get to keep the property which is exempt, but the rest of your property is going to be sold off in order to pay some portion of your debt. The state specific bankruptcy law determines what part of your property is exempt, and what can be sold.
Typically, Chapter 7 bankruptcy is more lenient towards the debtor and doesn’t involve selling your property. Instead, all the unsecured debts can be discharged, protecting you from repossessions, wage garnishing, and other ways your creditors may want to make you repay the debt you can’t afford.
Chapter 13 Bankruptcy
However, if you feel like you’ve only hit a rough patch and you only need a break from the repayment, there’s Chapter 13 bankruptcy. In essence, you can reprogram your debts towards your creditors and, given time, you can pay off the whole thing.
Before you can file for this type of bankruptcy, you need to meet with bankruptcy specialists who will try to help you assess your financial status and determine whether you can realistically repay all of your debts in a reasonable period. Typically, creditors are willing to negotiate repayment in the period of 3 to 5 years. If your bankruptcy consultants agree that you are a viable candidate, they will immediately set in motion all the necessary steps to get creditors off your back and start the program.
If this kind of bankruptcy sounds a lot like debt consolidation offered by private companies, that’s because it serves the same general purpose. However, debt consolidation companies can’t offer something a legal process of bankruptcy can – the end to the harassment of the creditors. They want the money that is owed to them, and only legal protection can guarantee that you will be left alone until you are capable of repaying them.
What about the Stigma?
There is always going to be a certain amount of stigma to people who file for bankruptcy. However, if it offers you a clean exit to your financial problems, it is well worth the stigma. Ultimately, not everyone needs to know that you have filed for bankruptcy, even your employer for the most part. Although they may find out if they do a credit score check, they cannot do that without your consent.
Ultimately, filing for bankruptcy is a big step and one which will stay with you for a while, so make sure that you are ready for what is to come.