Bankruptcy as a Debt Relief Strategy
Bankruptcy has a lot of negative connotations, but it doesn’t have to. Making the choice between bankruptcy or another debt relief strategy is an important one. As with any other debt relief strategy, bankruptcy can help you get out of debt. It’s not the end of the road; it’s the beginning to financial freedom. When your debt becomes more than you can handle, bankruptcy may be the best answer for your financial circumstances.
What is bankruptcy?
Bankruptcy allows you to take care of your debt, either through liquidation or reorganization. Through a Chapter 7 bankruptcy, some of your assets are sold to pay back the debt. Through a Chapter 13 bankruptcy, you are set up with a three- to five-year repayment plan.
How does bankruptcy work?
With the help of a bankruptcy trustee, you either a) sell your assets to pay off your creditors or b) set up a repayment plan, depending on the type of bankruptcy you use. Once the creditors are paid, the case is closed and you can go about rebuilding your credit.
What’s the difference between a Chapter 7 and a Chapter 13 bankruptcy?
For individuals, there are two types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7
- No Income required
- Can last four to six months
- Doesn’t cover all debt
- Non-exempt assets are sold
- Requires a bankruptcy trustee
- Not everyone is eligible
- No repayment plan
Chapter 13
- Must have reliable income
- Can last three to five years
- Has debt amount limits
- No loss of property
- Requires a bankruptcy trustee
- Not everyone is eligible
- Repayment plan required
Does bankrupcty affect my credit?
Truth be told, filing for bankruptcy will be a hard hit to your credit. Bankruptcy information will stay on your credit report for 7-10 years, depending on which one you use. However, once it falls off your credit report, you can start seeing a score boost.
Also, bankruptcy doesn’t mean that you can’t start rebuilding your credit once everything has gone through. For example, by smart management, you could see a Good rating within five years.
Is bankruptcy the right debt relief strategy for me?
Bankruptcy may be the best debt relief strategy for you if:
- You have no income (income is required for most debt strategies) OR
- Your income is not enough to repay debts beyond household obligations
- Debt settlement is not an option
- You have over $15,000 in unsecured debt
Bankruptcy isn’t for everyone, but when it’s the closest thing to a soft landing you can find, it’s the optimal choice. Call today for a one-on-one consultation with a certified debt professional. Don’t just guess – know what your best options are.
Is bankruptcy your new beginning?
Depending on your situation, bankruptcy may be the answer you need. But don’t just guess. Start the road to financial freedom with true knowledge. Call for a free consultation with one of our debt professionals.
Will not affect your credit score
