25 Aug Why Filing For Bankruptcy Can Mean A Fresh Start
Some may see bankruptcy as an unnecessary evil while others may see it as a lifesaver. Whichever side you’re on, bankruptcy can make a real difference for you and your family. It can help you gather your bearings when dealing with something as overwhelming as debt.
Here are a few reasons why filing for bankruptcy can mean a fresh start for you and your family.
Figure Out Exactly Who You Owe
When you file for bankruptcy the court is going to show you exactly who you owe and the balances of each loan you have. All your amounts will be put into perspective in an easy to read list.
This is a great place to start because you’ll be able to see exactly where you stand as far as debt goes and exactly what you need to pay to get free of it. The way you’ll pay these debts back depends on which type of filing you do.
Some people are under the assumption that when you file for bankruptcy all your debt just disappears. Unfortunately, this isn’t the case.
When you file for bankruptcy the court will give you a debt repayment plan. If you go with a Chapter 7 bankruptcy your plan will be 3 to 6 months. With this plan you’ll pay most of your debt off. This doesn’t include home mortgages, car notes, child support, or any tax debt you may have.
People enjoy this plan because it’s much quicker and they tend to pay off more. You may not qualify for a Chapter 7 filing if your income is too high.
If you do not qualify for a Chapter 7 filing you will fall under a Chapter 13. A Chapter 13 payment plan is 3 to 5 years in length. With this filing the bankruptcy court will roll most of your debts into one monthly payment based off of your household income. This ensures you can afford the payment and won’t default.
While it may take longer than a Chapter 7, people like the Chapter 13 because it gives them a plan where they didn’t have one before. Also, there’s an opportunity for a Chapter 13 bankruptcy to be removed from your credit after 7 years where the Chapter 7 will stay on for a full 10.
Strict Spending Rules
When you know exactly what you owe it becomes a little easier to plan and budget your money to pay off your debt. You won’t have a choice when filing for bankruptcy, as the court is strict about what you spend your money on. If you are doing a Chapter 7 filing the chances of you having to worry about this for more than 3 to 6 months are slim.
If you are doing a Chapter 13 filing you’ll be on a strict plan for 3 to 5 years. Any spending will be denied if the court deems your purchases nonessential.
The amount of personal belongings you get to keep will change depending on which type of filing you do. In a Chapter 7 filing you’ll lose more personal belongings but come out with less debt. In a Chapter 13 filing you’ll get to keep most of your personal belongings while paying back more of the debt you owe.
Credit Will Be Okay If Done Correctly
If done incorrectly, bankruptcy can be a destructive thing to do to your credit. People often say it’s pointless or it doesn’t make sense. That may be the case for some. For others, bankruptcy can mean setting yourself on a path to bettering your finances. It can be a step in the right direction instead of continuing on your destructive path.
It will help you resolve quite a bit of your debt to help you gain better footing and develop a financial plan. Continuing on the path you may be on isn’t any better. Bankruptcy is an option for those who have no options left.
Keep in mind that keeping up with your credit and minding your spending are important things to do to avoid having to file for bankruptcy. However, if you’re already in over your head then bankruptcy can be a great tool to help get you back on your feet and on your way to better credit.
We are one of the most experienced bankruptcy law firms in Minneapolis. If you are considering bankruptcy, we urge you to speak to one of our highly-qualified bankruptcy lawyers to learn more about what options are available for you.