The thought of filing Chapter 13 bankruptcy is an unattractive option for millions of consumers, especially if own a home or are planning on purchasing a home in the future. While this should be a last resort, filing for bankruptcy can provide much needed financial relief for those in dire circumstances. Determining whether or not you should file for bankruptcy is a highly individualized process; however, there are some general tips to follow, which clarify whether or not you should go through this process.
When Should I Declare Bankruptcy?
The answer to this questions depends on your current financial standing. In order to clarify where you are currently in terms of debts and financial ailments, answer the following questions:
I. Are you only able to make minimum payments on revolving debts, such as credit cards?
II. Is your phone constantly ringing from bill collectors?
III. Are you having to use credit cards to pay for life necessities, such as food and gas?
IV. Are you unaware how much money you actually owe creditors?
If you answered yes to three or more of these questions, then you may want to consider filing for bankruptcy. Obviously, you should only file if debt consolidation is not an answer. For example, those who cannot afford their monthly bills sometimes aren’t able to afford the monthly payments from a debt management program offered by credit counseling agencies. If this is your current standing, then you should deeply consider filing for Chapter 13 or Chapter 7 bankruptcy.
For consumers, there are two primary forms of bankruptcy, which include:
I. Chapter 7 Bankruptcy – This form of bankruptcy liquidates all non-exempt assets with the primary goal of satisfying creditors. Generally speaking, this is the ideal option for those who have a large sum of unsecured debt, such as credit cards and medical bills. If you have limited income, then this is your best option.
II. Chapter 13 Bankruptcy – This form of bankruptcy is slightly less serious as it doesn’t eliminate debts, but rather restructures your debts by providing a low monthly payment plan. This is the ideal option if you have a decent income and wish to avoid loosing your home while simultaneously paying off owed money.
While the advantages and disadvantages of filing for either Chapter 7 or Chapter 13 bankruptcy vary from person-to-person, the true benefit is based upon your financial desires. Perhaps the most important reason why individuals file for bankruptcy is to prevent lawsuits, wage garnishment or asset seizure. If you’re interested in possibly filing for bankruptcy, speak to a bankruptcy lawyer to determine what your best options actually are.