Debt, for some, is unavoidable. Sudden medical bills, the loss of a job or other life challenges may make it necessary to take on debts. Once they’re back on their feet, many people pay off these debts and carry on with life. Some, though, struggle for too long and fall behind. They may feel they can never get out of debt, which becomes a stressful burden.
One possible solution is to consider bankruptcy. Many do not consider it because of the implications it has in the near future, but if you’re truly in over your head, it has the potential to help you significantly. There are other options, such as debt management plans or settlements, that could also help you.
There are two primary types of bankruptcy, Chapter 7 and Chapter 13. Chapter 7 eliminates nearly all of your debt except for a few exempt categories. Chapter 13 allows you to make payments on debts for three to five years. At that point, the remaining debts are forgiven.
Which one is right for you?
It depends on your circumstances. If you have significant credit debts, Chapter 7 may work fine. If you make too much money to qualify, Chapter 13 becomes an option.
With Chapter 7 bankruptcy, you must know that you can’t discharge certain debts such as school loans or tax debts. You won’t be able to eliminate child support payments or alimony, either. A personal bankruptcy is best for unsecured debts, if you have a large amount you’re unable to pay for due to a loss of income or other financial difficulties.
Source: Bankrate, “Is bankruptcy the best way to handle debt?,” Steve Bucci, accessed April 18, 2018