No matter how hard you try to recover and get back on top of your finances, sometimes debt is such a slippery slope that it can be hard to keep your head above water, and when faced with extreme financial difficulty it might be worth considering the option of bankruptcy.
The social stigma that was once associated with bankruptcy is nowadays much less potent, due in part to the number of people having to file for bankruptcy in the past decade and popular entrepreneurial culture that has seen many highly successful business people go bankrupt multiple times only to rise up, bounce back, and become millionaires.
This article looks at the most common method of filing for bankruptcy in the United States; known as a “Chapter 7” bankruptcy.
This method will usually result in most of your debt being discharged, meaning you won’t need to repay what you owe – however, some of your assets may be collected and liquidated in or to settle the outstanding debt.
Technically, you can file for bankruptcy yourself though many people appreciate the support and advice of having a bankruptcy lawyer handle their case. There are plenty of specialist attorneys that can help with bankruptcy filing for less than $1,000.
Chapter 7 bankruptcy usually takes around three months for the process to be completed, if it’s simple, but for many people, four to six months is an average timeline.
Eligibility for chapter 7 bankruptcy proceedings are based on a variety of factors including income and whether you have filed bankruptcy in the past. The most significant stumbling block is whether the court considers you did not file your case in good faith, as this way, you might not be able to obtain a discharge from bankruptcy; an example of bad faith would be to conceal assets or misstate your income.
BENEFIT OF BANKRUPTCY
In addition to the obvious benefit of no longer having responsibility for the debt you owe a bankruptcy order provides an injunction that stops creditors from collection activities including wage garnishments and lawsuits. Essentially, this means that a lot of the stress is put on hold – as the credits cannot go after your home or car without authority from the court. It means that all the stress and hassle of being pursued by creditors will stop.
Once the bankruptcy process is complete the court will discharge you from the responsibility of your debt; meaning, you no longer owe the amount you owe as it relates to the law; the debt is basically written off, and wiped clean. That said, your credit history will be severely affected (yet it would be if you kept missing payments anyway, so there’s a question as to how much of a prohibiting factor this should be).
There are however, certain types of debt that can’t be discharged in bankruptcy such as student loans and tax debt which will remain your legal responsibility even with going bankrupt.