How to Know if Personal Bankruptcy is Your Best Option
Filing for personal bankruptcy may sound ominous, but there are times when it’s probably your best option. In this article, we’ll talk about how to recognize if bankruptcy is your best path forward. In it, we’ll share excerpts from an article by Erica Sandberg originally published on creditcards.com.
The Two Types of Personal Bankruptcy
Before we go any further, it’s crucial that we point out the differences between the two types of personal bankruptcy:
- Chapter 7 Personal Bankruptcy In a Chapter 7 personal bankruptcy, some or all of your assets are sold to pay back a portion of your debt.
- Chapter 13 Personal Bankruptcy If you file for a Chapter 13 personal bankruptcy, a new plan of action will be developed to repay your debts. Typically, you’ll make installment payments to your creditors for 3-5 years until the debts are paid.
Checklist For When To Know Bankruptcy Is The Best Option Your economic situation will probably not improve in the near future.
If your tough times are merely temporary and can be remedied by a better paying job on the horizon, a gift or inheritance, it may be worth toughing it out. But if you don’t see your situation improving, bankruptcy may be the best way forward.
You’re ok with the potential downsides of bankruptcy.
Whether you decide to file for Chapter 7 or Chapter 13, you’ll be required to complete counseling. Most of these specialized courses are completed online, and they’ll give you a comprehensive understanding of what may happen if you file. This can include losing certain assets or properties, and the effects it will have on your credit report.
Essentially, being insolvent means that your debt obligations are worth more than your assets. When this happens, it can be difficult to see another way out from under the debt responsibilities beyond bankruptcy.
You’re seriously behind in your debts.
In a study carried out for the Federal Reserve Bank of New York, the author found that once people fell more than 120 days behind with a debt, their money troubles became significantly worse, as balances fell to collections.
You’re ok with walking away from your financial obligations.
Whether it’s a feeling of relief or depressions, there is often an emotional component to filing for bankruptcy. That’s why you should take your time in thinking about how you’d react if you filed for bankruptcy.
Thinking of Filing for Bankruptcy? Call The Oswalt Law Group of Arizona
The decision to file for bankruptcy is a serious one, and definitely one you should talk over with a bankruptcy attorney. For a free consultation, call us here at The Oswalt Law Group; our number is 602-225-2222.