When to Use Bankruptcy for Debt Problems

Individuals can try to cure their debt problems in many different ways to avoid bankruptcy. For instance, they can try to negotiate debt settlements with creditors or try debt consolidations. However, these debt management options don’t offer the legal protection bankruptcy does and can lead to filing bankruptcy anyway. Debt problems which can range from credit card debt to back mortgage payments can be solved with bankruptcy.

There Are Two Types Of Bankruptcy

People filing personal bankruptcy have two options according to their income. Chapter 7 is one bankruptcy option which discharges, or purges, people’s debt. In other words, individuals won’t have to repay creditors under chapter 7 bankruptcy. However, the bankruptcy trustee may request property that’s considered non-exempt items to sell with the proceeds going to creditors. People with regular income have another option called chapter 13. Under the chapter 13 bankruptcy, repayment plans are created which can last 36 to 60 months and require people to pay a set monthly amount. After the money is repaid, the bankruptcy cases are discharged. However, people aren’t required to hand over any personal property to pay for the debt.

Types of Debt Problem Bankruptcy Cures

People can use bankruptcy when they are overwhelmed with debt. However, bankruptcy process also provides people legal protection against creditors attempt to collect. Anyone behind in their mortgage payments—or worse facing foreclosure—can stop the process by filing bankruptcy. Also, bankruptcy can stop any car repossessions. If people are facing or have their utilities shut-off which include gas, electric or water, the bankruptcy will help. The utility companies are prohibited from turning off services. They must restore the services if they are already shut off when the bankruptcy cases are filed. For individuals facing lawsuits, bankruptcy prohibit creditors from proceeding—no matter what stage of the process the lawsuits are in. Also, wage garnishments are also stopped.

Obtain Legal Help

For people considering bankruptcy to help with debt problems, bankruptcy lawyers can be of great assistance. They will advise people about bankruptcy process which includes pursuing U.S. Bankruptcy Court required credit counseling. The lawyers will determine which bankruptcy chapters are best for people’s particular financial situations. For instance, chapter 13 is best for people trying to save their homes. Also, bankruptcy lawyers will file bankruptcy cases immediately to stop any actions such as foreclosures.