Individuals who have made the decision to file for bankruptcy should realize that they are in for a lot of difficult work. They will have to remain focused on the task at hand in order to succeed in their case. This is especially true because there are a lot of details that cannot be overlooked or they will risk having their case dismissed. While many people choose to go through the process on their own, individuals should always consider getting some advice from a consumer credit counselor to make sure that they understand the Bankruptcy Code completely, or at least the parts that affect them.
Decisions to Make Prior to Declaring Personal Bankruptcy
Before anything else, individuals need to decide which type they should be filing. While 98% of all personal cases filed in the United States are Chapter 7, Chapter 13 is a very common credit solution as well. Chapter 7 is available to both individual consumers and businesses. This type is also commonly referred to as “straight bankruptcy” as it is relatively simple and quick. Basically, it involves liquidating assets in order to eliminate debt. For those who have assets that are mostly exempted from liquidation, this is the most ideal type.
On the other hand, Chapter 13 involves a credit solution that requires the development of a repayment plan. This type is also commonly referred to as the “Wage Earner Bankruptcy” as those who file for it are generally individuals who receive stable income and would, therefore, be able to repay their debts given a more manageable payment structure. This is the best choice for those who could lose a lot of assets through a Chapter 7. It is also the only choice for those who do not meet the income requirements for Chapter 7.
Apart from the type to be filed, individuals in dire financial distress have many other things to decide on. With Chapter 7, it is possible that, somewhere in the process, they will have to choose which assets should be exempted from liquidation and which ones they will turn over. On the other hand, with Chapter 13, they may be made to determine how they will pay back their debt.
Consulting With Consumer Credit Counselors and Other Experts
Those who are inclined to file for Chapter 13 may want to consider trying to repay their debts away from courts and on their own. This is because bankruptcy will be part of their credit report for about a decade and will definitely impact their credit score throughout that time.
Individuals have many other credit solutions available to them and engaging the services of a lawyer or a consumer credit counselor may be a very good move to determine what those options are. If this financial process is truly the best or only option, the services of such professionals may still be of value in providing guidance or in determining the most beneficial repayment plan possible. They may also assist debtors in terms of debt negotiation.
Bankruptcy is not considered as the worst credit solution for consumers but there are definitely times when it is not the best option, especially considering the effect it has on the future financial standing of those who file for it. Consulting with a consumer credit counselor, a financial lawyer, or a debt expert may be the best way to determine what credit solution is best for each financial situation.