To file for bankruptcy or not: That is the question on many people’s minds. The pandemic has had a significant economic impact on countless Americans, and its effects will likely be felt for years.
Bankruptcy is an option, but it carries pros and cons. Depending on your circumstances, it could be a smart move to help you get out of debt. A recent Newsday “Money Fix” article examines when filing for bankruptcy makes sense — and when it doesn’t.
Why should I file for bankruptcy now?
Each situation is different. Bankruptcy is often a smart option for anyone facing significant debt and has considered all other options to manage and reduce debt. Individuals may reach a “personal breaking point” and decide to consider bankruptcy, according to Newsday. The ending of pandemic unemployment assistance, for example, could be the financial hit that triggers a bankruptcy filing.
Here are a few other reasons why you might consider bankruptcy:
- Repaying your debt is creating an undue burden on your life.
- The bank is foreclosing on your home.
- Your landlord is evicting you.
- Your car is in danger of being repossessed.
If you file, your creditors must stop collection efforts, including:
- Garnishment of wages
- Bank account levies
- Foreclosure on your home or any other property
What are the types of bankruptcy?
When weighing the option of filing, you need to consider which type of bankruptcy is best for your circumstances:
- Chapter 7, which allows you to wipe out most debts by having the U.S. Bankruptcy Court issue what is called a "Discharge of Debt." Most people choose Chapter 7 instead of Chapter 13 (see below) because this option, also known as liquidation bankruptcy, eliminates the need to pay back creditors for unsecured debt.
- Chapter 13, which allows a fixed period of time to repay overdue portions of debts. An individual filing under Chapter 13, also known as reorganization bankruptcy, can create a plan that includes affordable monthly payments over a period of three to five years. After you complete the repayment plan, any remaining unsecured debts, such as credit cards or medical bills, may be discharged. In other words, you won’t have to repay those debts.
Filing under Chapter 13 means you may be able to hold on to your property. Under Chapter 7, most of your property is sold and used to pay off your debts.
Bankruptcy can help you wipe the slate clean and start over. However, the process is complex. It can be difficult to decide which pathway is best – Chapter 7 or Chapter 13 – or perhaps another alternative.
How a bankruptcy attorney can help
Bankruptcy filings can quickly become complicated, whether you’re pursuing Chapter 7, 13 or 11. Our experienced and trusted attorneys can help you decide which option is best.
The experienced attorneys at Benjamin R. Matthews & Associates, LLC can help you navigate the process. Our firm has years of experience helping people develop thorough and comprehensive financial plans that fit their needs.
Contact experienced bankruptcy attorney Ben Matthews today for a free consultation.