To many people, bankruptcy smacks of failure, conjuring up images of desperate celebrities who’ve squandered their wealth and sunk into despair. But is bankruptcy really only for people with no other options? You may be asking yourself, should I file bankruptcy, or is there another way out?
If you are struggling with debts, bankruptcy can give you a chance to start fresh. But it’s important to understand what filing bankruptcy can and can’t do. Learn about your options by calling our Cleveland Bankruptcy Attorney.
What to Consider Before Filing
It’s important to be aware that bankruptcy will affect your credit score for years, which can impact your ability to obtain loans, mortgages, and other financial goals. And since the decision to file bankruptcy isn’t one to be made lightly, you should carefully evaluate all of your options.
What Type of Assets and Debts Do You Have?
To determine whether bankruptcy is right for you, you should begin by reviewing your assets and debts. List all retirement accounts, investments, securities, bonds, homes, cars, and other accounts. Determine how much you owe to creditors. Total your bills and other debt payments as well.
If your assets are valued at less than what you owe in debts, or if you want to keep the majority of your assets, bankruptcy might be a good option for you.
Keep in mind that not all debt can be eliminated through bankruptcy. While credit card debt, medical bills, and personal loans can be discharged, other debts like alimony, child support, tax debt, and student loans cannot be eliminated. However, they may be able to be managed through a payment plan.
What Are the Benefits of Bankruptcy?
Stop Debt Collector Harassment
When you owe creditors more than you can pay, you could be the victim of debt collector harassment. Filing bankruptcy puts a stop to harassing phone calls while you figure out a plan to discharge or reorganize your debts.
Stop Foreclosure and Car Repossession
If the bank has threatened foreclosure or taken action, bankruptcy can temporarily stop it. When you file bankruptcy, you will be granted an “automatic stay,” which halts all debt-related legal action against you. This applies to car repossession as well.
Stop Wage Garnishment
If a creditor is garnishing your wages to pay back a debt, bankruptcy will stop these actions. Creditors will have to cooperate with the bankruptcy court and that debt will either be discharged, paid through liquidation of assets, or rolled into a manageable payment plan.
Should I File Bankruptcy Chapter 7 or Chapter 13?
The two most common types of personal bankruptcy are Chapter 7 and Chapter 13.
Chapter 7 is best if you pass the Means Test and have a lot of dischargeable debt, such as medical bills, credit cards, and other unsecured debts. In Chapter 7 bankruptcy, you will liquidate assets to pay creditors, and then the majority of your debt may be discharged.
Chapter 13 is a good option if you have enough income to repay most of your debts over a three- to five-year payment plan. It’s also a good option if you want to keep your property. Any debts remaining after the payment plan may be discharged.
Speak to a Cleveland Bankruptcy Attorney Today
If you have questions about whether bankruptcy is right for you, call Benson Law Firm. We can help you evaluate your situation and understand your options.