Bankruptcy is usually a last resort for people who are overwhelmed with debt and hassled by creditors on a daily basis. Bankruptcy might negatively impact your credit score, but it can also help stabilize your finances and get you back on your feet. In many cases, bankruptcy can be a fresh start. If you have many instances of repossessions or foreclosures on your credit report, it’s possible for your credit score to actually become higher after bankruptcy. Options are available for families and individuals looking for a way to obtain financial freedom. There are two types of bankruptcy. Chapter 7 bankruptcy is typically known as liquidation bankruptcy. This is when any non-exempt assets are sold in order to pay creditors. Chapter 11 (or “rehabilitation” bankruptcy) is when debts are reorganized and payments and interest rates are lowered to amounts that are more manageable.
Bankruptcy ccould be the best option when you want to repay most of your debts and re-establish your credit. It could stop foreclosure, repossession, and wage garnishment. In many cases, bankruptcy offers the best way for a family or person to start over and build their credit and finances responsibly.
Many people with heavy debt burdens may be wondering, “Is bankruptcy right for me?” Bankruptcy could be the best option if your low credit score and debt impacts your life in an extremely negative way. For many people, this means that getting a job and keeping a home, car, or insurance is almost impossible. If you would like to keep up with payments but have fallen behind due to unforeseen financial hardships, bankruptcy might be the best choice for you.
Before filing for bankruptcy, make sure you have explored all other options. It’s important to go to counseling before choosing any form of debt relief, and it’s required for those interested in bankruptcy. Options usually discussed by a credit counselor are debt consolidation, settlement, and customized debt management plans.
If you have excessive medical bills or credit card debt, Chapter 7 bankruptcy could help dissolve it. It could also eliminate aggressive calls from creditors. And on a positive note, if you already have a low credit score, bankruptcy won’t make much of an impact.
There are many options other than bankruptcy available for you to explore. In many cases, you might be able to consolidate your debt through a home equity loan or second mortgage. If you have any chance to pay down your debt without taking the drastic step toward bankruptcy, you should do it. Consolidation might not work for everyone, but many people find their debts are much more manageable combined into a smaller payment with a lower interest rate. Debt settlement is a similar option that requires you to work with your creditors to negotiate a lower payment, interest rate, or payment plan. In some cases, your current payments might be waived in exchange for larger payments at a later date. Sometimes, creditors will allow you to catch up on current payments by paying the older payments in the future.
Selling your property is another way to avoid bankruptcy. Since filing Chapter 7 involves liquidating your assets, you could completely avoid it by selling any extra valuables on your own. A second car or collection of antiques could be a great source of extra income. Many people turn to eBay, Craigslist, or pawn shops to sell their belongings. You could also refinance your mortgage with a lower interest rate: This often results in extra income, which can be put toward paying down your debt.
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