Home Mortgage and Finance

Bankruptcy is often considered as a viable debt relief option by people who have a lot of outstanding debt and are struggling to find a way out of it.  Despite bankruptcy proceedings being both costly and damaging to their long term financial standing, they see this “nuclear option” as the easiest option available to them.  This may be the case for some, but bankruptcy was never intended to be a one-stop solution to debt problems.  It was put into place for people who have accumulated so much debt that there is no way of them ever being able to repay them.

I am not saying that, in some extreme circumstances, bankruptcy should not be considered as a debt relief option.  What I am saying is that you should consider the options available to you very carefully before deciding to declare yourself bankrupt.

Things To Be Aware Of When Considering Bankruptcy

The first thing to bear in mind is that knowledge is power when it comes to looking at debt relief options.  Quality legal advice is a “must have,” and you should spend some time finding the best representation available.  Professionals that understand the workings of the legal system are the best sources for advice and can help you decide if bankruptcy is the most suitable option for your situation.  While it can be easy for an individual who is already under a great deal of strain and anxiety to believe that bankruptcy is the only option available to them, this is often not the case.

Types Of Bankruptcy

After taking appropriate legal advice, once you do decide that bankruptcy is the only option for debt relief in your situation, then the next step is to look at which type of bankruptcy fits your situation and circumstances.

In most cases, a Chapter 7 (or “Straight bankruptcy,”) filing is the most common option for individuals.  By liquidating assets to repay debtors, the debt incurred in most cases is removed.  However, there are some assets protected from liquidation and some forms of debt cannot be repaid or removed through this form of bankruptcy.

Since the bankruptcy reform of 2005, there are more legal qualifications needed to qualify for a Chapter 7 bankruptcy.  A knowledgeable and certified legal source can help you through these questions and problems.

There is also the Chapter 13 (or “Reorganization,”) filing.  Overseen by a federal bankruptcy court, it allows indebted individuals to reorganize their debts in an attempt to repay creditors and enact debt relief.  The court’s purpose is to help individuals come up with a plan of action to repay the debts they have incurred.  The filers must, at a minimum, come up with a plan to use every cent of disposable income to repay debts or liens.

Whichever type of bankruptcy you ultimately decide to opt for, there will most certainly be serious and life-long repercussions.  Bankruptcy is not something to jump into lightly, and you should always seek professional advice to determine the best course of action for you.  Consider alternative forms of debt relief first and only consider bankruptcy if there is no other debt relief solution available to you.   As with all legal matters, proper research, planning and analysis is the key to finding the correct answer for your own particular circumstances.