What do you do when you have no money to pay your bills? When you’re short of cash, just like many Americans are today, the first step is to evaluate how much debt you have versus your assets. It’s a good idea to think about things in the long term like five years. If you don’t think that after cutting your expenses, you won’t be able to pay all your debt off in a five-year timeframe, you should consider filing for bankruptcy. The first thing you will want to do is to come up with some sort of plan. To come up with a feasible plan, you will need to figure out a primary route and backup plan, just in case things didn’t work out like you thought it would.
If you’re considering bankruptcy as a form of debt elimination, but feel you would like to pay back part of your debts, you could consider filing for Chapter 13 bankruptcy. The Chapter 13 bankruptcy allows the debtor to come up with a feasible 3 to 5 year payment plan to pay back part or all of their debts. The good thing about Chapter 13 is it gives the debtor the power of the legal system to make sure the creditors don’t change the rules midstream. That is a problem with debt consolidation, many times halfway through the payment process the creditor changes the rules and asks for more. When filing Chapter 13 bankruptcy, the debtor gets to hide behind the automatic stay. The automatic stay stops all contact from the creditors and keeps them on a short leash.
If it’s impossible for the debtor to pay back any of the debts, Chapter 7 bankruptcy is for them. Filing a Chapter 7 bankruptcy will wipe out all unsecured debts, including, credit cards and payday loans. After filing bankruptcy the automatic stay is put in place stopping creditors from any collection attempts. The automatic stay also will stop foreclosure, wage garnishments and lawsuits. The Chapter 7 bankruptcy is the king of all bankruptcies because it’s quick, fairly simple and there’s no payback to get a bankruptcy discharge. The only bills the debtor is responsible for is the ones that they choose to reaffirm like an automobile loan or a mortgage.
Having financial difficulties can be very stressful, but having a plan will make them easier to deal with. When problems arise, consult a bankruptcy attorney to see if now is the time to pull the trigger. When bankruptcy is used properly they could put the debtor on the path to becoming debt free.