Most everyone faces debt at some point in their lives. For most people, slowly paying off their debts is effective and they do not experience any true financial problems. Unfortunately, debt can sometimes unexpectedly get out of control. The loss of a job, a reduction in income, or a serious illness can all have a negative impact on debt. There are many options for successfully overcoming debt. Those who are finding themselves in over their heads may find it beneficial to file bankruptcy.

What Is Bankruptcy?

Bankruptcy is a legal process that allows individuals to overcome their debt while being fair to creditors. There are two main types of bankruptcy for individuals and couples. The two types are either liquidation or reorganization. Both of these can be effective in helping a person overcome their mounting debts for a fresh start. Those who are dealing with debt may need to Ask a bankruptcy lawyer question.

Types of Bankruptcy

There are two main types of bankruptcy most individuals will be able to pursue. Having a sound understanding of both types helps individuals to make the right decision for their financial needs.

Chapter 7 is a liquidation bankruptcy and is the fastest option. With this type, individuals must have some of their non-exempt assets liquidated so their debts can be paid off. In most cases, this bankruptcy is settled in around six months.

There is also an option for reorganization with Chapter 13 bankruptcy. This type of bankruptcy is beneficial for homeowners who are in danger of losing their homes to foreclosure. The debts are set up in a repayment schedule that is approved by the court.

Is Bankruptcy Right for You?

When dealing with debt, you may feel like it is impossible to get out. Debt can sometimes mount without warning and lead to serious ramifications. The following are some factors to consider so you will know whether or not to seek bankruptcy.

• Are you finding yourself using credit cards to attempt to pay off the debt that is owed?
• Is your savings account quickly dwindling because of debt?
• Do you have mostly unsecured debts such as credit cards and hospital bills?
• Are you fully educated on the available bankruptcy options?
• Are you prepared for changes in credit score and difficulty seeking credit approval?
• Are you in a position to make positive changes to spending habits and budgeting?

If you are able to answer yes to the above questions, bankruptcy may be a viable option for helping overcome debt. It is important you realize bankruptcy will not erase all debts, including student loans. It is essential you become fully educated on the topic of bankruptcy options so you will be able to make the most pragmatic decision.

Steps to Take

Taking the right steps in seeking bankruptcy is vital for the outcome. Although not required, many individuals feel more confident in getting help from a bankruptcy lawyer. A lawyer can ensure all of the paperwork is filled out and filed correctly so there are fewer delays and less chance of being denied.

Gathering all of your debts and asset information will help the lawyer to determine the best bankruptcy option. Allowing a lawyer to guide you in the decision process will ensure the right choice is made.

Conclusion

While bankruptcy seems to hold a social stigma, there is no shame in seeking this legal method of overcoming debt. Being prepared for the process is crucial for getting the best outcome.