When most people hear the word “bankruptcy,” they are stricken with fear. Yes, it is true that declaring bankruptcy can significantly lower your credit score, but for many people, a liquidation or reorganization of debt can be a relief. In these instances, bankruptcy can actually be the first step to financial recovery when debt has spiraled out of control.
When it comes to personal bankruptcy, there are two different ways to file: Chapter 7 and Chapter 13 bankruptcy. The different between Chapter 7 and 13 lies in the way in which the debt is resolved. In Chapter 7, a person files to have their debt wiped out completely, which is known as a liquidation; this is an option for both individuals and business owners. Filing Chapter 13 allows the debtor to reorganize his or her debt in order to develop a manageable way to pay back creditors.
Speaking with a bankruptcy attorney is the first step in determining which type of bankruptcy you need to file. But when should you make the call to one of your local bankruptcy lawyers? Here are four situations where you may want to consult a professional about a bankruptcy:
1. If your home may be foreclosed upon: If you’ve lost your source of income or have dealt with other hardships, it may be easy to fall behind on your mortgage. In this case, you may want to see a lawyer about filing for Chapter 13 bankruptcy. This form of bankruptcy makes it easier to salvage assets, such as a home or vehicle.
2. If you have mounting medical bill debt: Approximately two million people in the U.S. declare bankruptcy over unpaid medical bills each year, so you’re not alone if you’ve found yourself in this situation. Medical bills and illnesses account for the majority of personal bankruptcy cases: about 62% of them. Filing for either Chapter 7 or Chapter 13 can make this type of debt easier to deal with.
3. If you have credit card debt that you can’t pay back: Many Americans find themselves in over their heads when it comes to credit card debt. Fortunately, it is possible to have this type of debt forgiven. Filing for Chapter 13, however, may allow the debtor to find an easier way to pay back that debt over time.
4. If you are getting divorced: Finally, divorce is a difficult time in anyone’s life. One issue that arises in many cases is the debt that the couple has accrued throughout the years. If the divorce may result in considerable debt for either party, it may be wise to meet with a bankruptcy attorney.
Have more questions about filing for bankruptcy? Speak with a bankruptcy attorney in your area to find out more about liquidating or reorganizing your debt. If you have general inquiries, feel free to leave a comment below. For more, read this link.