The decision to file for bankruptcy is often one of the hardest choices that a person has to make in his or her lifetime. Poor planning can often make the process even harder. It goes without saying that filing for bankruptcy should be a last resort, and should only be done when all other methods of satisfying one’s financial obligations have been exhausted. However, if your situation has become so severe that you are in danger of foreclosuregarnished wages or repossessions, or are facing debts that you are in no position to pay, putting off the inevitable can have devastating consequences. Procrastination can cost you your car, your wages, and even your home. Filing your case in a timely fashion can spare you these losses.

  • If you are close to foreclosure on your home, declaring bankruptcy may stop this from going forward and even create a payment structure that will help you pay off your arrears.
  • Bankruptcy may cause your car or other property to be given back to you if they have been repossessed by a creditor.
  • Large medical bills combined with a loss of employment, or on their own can create a nearly impossible financial hole to climb out of. Bankruptcy can help you in this situation and possibly reduce or even wipe away your medical bills.
  • Bankruptcy can stop harassing creditors from turning up on your doorstep, especially if they are being unfairly pushy or unreasonable or are fraudulently trying to take more than you owe.
  • If your utilities have been shut off, bankruptcy will help restore these so you do not have to live in darkness.
  • Although your student loans will not disappear, bankruptcy may help you to consolidate those debts and pay them off in a reasonable timeframe.
  • Bankruptcy will end wage garnishment, which means you will be able to afford life’s necessities.

You may have more than one of these issues overlapping in your life and bankruptcy may be the best and most logical way to start your financial life over.

The two most common Personal Bankruptcy options are Chapter 7 and Chapter 13.

Chapter 7- Liquidation

Typically set up for debtors that  do not meet “regular income requirements”  and are not able to pay off their existing debts.

Under the Chapter 7 law, a debtor may be able to claim certain property as exempt from creditors. It also states that some debts, such as student loans, most taxes, fines, penalties, forfeitures, and criminal restitution obligations cannot be discharded under the law.

Chapter 13- Repayment of All or Part of the Debts of an Individual with Regular Income

As stated in the title, this is designed for those who maintain a regular income and would like to set up a court approved payment plan to pay all or part of the debts over a period of time.

The payment plan is typically set up over a 3 to 5 year time period depending on the particular financial situation of the debtor. Once again, there are particular debts that cannot be discharged under the law.