How can I decide if bankruptcy is right for me?

How can I decide if bankruptcy is right for me?

On Behalf of | Aug 10, 2021 | Uncategorized |

The last two years have been tough on everyone. Many lost jobs or income, and some used debt to keep their family financially afloat. Unfortunately, using debt to make ends meet is only possible for so long, so many are now wondering whether they should file for bankruptcy. And, those thinking about it should know that they are not only. Personal bankruptcy filings have already spike to nearly 80,000 this year.

Chapter 7 bankruptcy

The most common form of personal bankruptcy is Chapter 7 bankruptcy. This is the most popular because it erases debts, but it may cost one their home and nonretirement assets. It is usually the cheapest way to file, especially if one falls below income limitations.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is much more expensive, and it also erases debts. But, it only does so after a three- to five-year payment plan is completed. Though, this will usually protect one’s home. Deciding on which is appropriate is usually done with an attorney.

How bankruptcy can help financially

Most importantly, bankruptcy can offer a fresh financial start. It can wipe out all kinds of debts, like medical bills, credit card balances, etc. It can also help one get their retirement gameplan back on track because it will free up more money for retirement, especially as bankruptcy protects up to $1.36 million in IRA assets.

Bankruptcy can lead to a better credit score

Of course, the bankruptcy itself will lower a credit score immediately and last up to 10 years on one’s report, but it can be the first step to a better score. Since debts are eliminated, it makes making bill payments and credit payments left over much easier. And, as one keeps making on-time payments, over time, one’s credit score will steadily improve.

Bankruptcy is not always right

First, and foremost, if one’s primary issues are student debt related, bankruptcy may not help. Student loan debt is rarely allowed to be eliminated in bankruptcy, but it is not always impossible. Bankruptcy also does not affect alimony, child support, taxes or a car loan. Though, one may be able to keep their car, depending on the situation. For Landover, Maryland, residents thinking about bankruptcy, what should not hold one back is feeling embarrassed. Indeed, bankruptcy can alleviate many, if not all, of one’s financial issues.