Bankruptcy is a legal preceding that involves a person (or business) that is unable to repay their outstanding debts
Why It's Important
Declaring bankruptcy gives the filer a chance at regaining financial traction after a hard fall. Depending on the type filed, some or all of the debts could be discharged. All bankruptcies have a negative effect on your credit score for up to 7 years! So, this should be a last resort! I hope that none of my followers get to this point but if you do, it is good to know your options. There are three popular types of bankruptcies:
Chapter 7 - This is the most common type of bankruptcy. It allows the filer to have all of their debts forgiven after their "non-exempt" assets are sold and the proceeds are used to pay off as much as possible.
Chapter 11 - This is only for businesses. I won't go into detail but it allows businesses to restructure their assets and debts. The business also stays open during proceedings.
Chapter 13 - This involves repaying some of the debts and having the rest forgiven. Usually, a filer would use this option if they didn't want to give up their property or their income is too high for Chapter 7.
If you're facing such an issue go over it yourself before hiring an attorney so that you don't end up creating an even bigger problem.
Join our mailing list to receive the latest news and updates from our team. Your information will not be shared.