Should your finances take a turn for the worse, there may come a point in the near future when you ponder the pros and cons of bankruptcy.
Before you decide in favor of or against bankruptcy, it’s critical to answer a variety of questions as they pertain to your situation. Here are a few that will put you on the right track:
- Are all types of bankruptcy generally the same? While they share some similarities, each type of bankruptcy is unique in a variety of ways. For example, Chapter 7 bankruptcy allows you to discharge some or all of your debts. Chapter 13, however, is accompanied by a repayment plan that lasts anywhere from three to five years.
- What are the benefits of bankruptcy? Bankruptcy doesn’t work for everyone, but if your finances are in a state of disarray it’s something to consider. For example, if you qualify for Chapter 7 bankruptcy, the primary benefit is the ability to discharge your debts, thus giving you a fresh start.
- Does bankruptcy affect your credit score? Yes. A Chapter 7 bankruptcy filing will remain on your credit report for 10 years, while a Chapter 13 bankruptcy is visible for seven years. Even though it will drag down your credit score, you can begin to rebuild it as soon as your filing is behind you.
- Does filing for bankruptcy mean you’ll lose everything? This is the primary concern of most people who are on the fence. They understand the benefits of filing for bankruptcy, but have concerns about losing all their assets. Even though you may lose some things, there are exemptions that allow you to protect many of your assets.
Don’t let these questions, among others, stop you from filing for bankruptcy. Answer them, consider the impact on your life and then decide what to do next.
Even if bankruptcy isn’t the right answer at the present time, you may find that it’s the perfect solution should your financial circumstances continue to worsen.
Once you’re 100% on board with filing for bankruptcy, compare the finer details of each type and devise a plan for taking action.
