Filing for bankruptcy is a big decision to make, and for individuals filing a personal bankruptcy claim (usually either Chapter 7 or Chapter 13), the entire process can seem extremely daunting. Before you even get to the stage where you can benefit from bankruptcy help (usually best provided by a local bankruptcy attorney), you have to figure out if filing for bankruptcy is even a good idea at all.
Plenty of debt management groups and services will argue that bankruptcy is rarely — if ever — the best option for an individual, but it’s important to remember that every person’s financial situation is completely different, and there isn’t one solution that will provide the best results in every case.
If you’re struggling with your finances and you’re starting to wonder what it means to file bankruptcy, and if it’s really the best choice for you, here are a few reasons why filing for bankruptcy is likely the best solution:
- For individuals, Chapter 7 and Chapter 13 are the most common chapters of bankruptcy, and the Chapter 7 bankruptcy timeline spans about three to six months, while a Chapter 13 bankruptcy timeline can take a few years to pay off. A lot of people don’t realize that there are certain debts that can’t be expunged in either chapter, including student loans and child support payments, but if the majority of your debt can be eliminated or reduced in a bankruptcy case, then it might be the best option.
- Even though a Chapter 7 bankruptcy can eliminate debts in less than a year, it typically stays on the person’s credit report for about 10 years, thus making it difficult to take out loans, mortgages, or credit cards for that entire time. A Chapter 13 bankruptcy isn’t necessarily as harsh because the debtor sets up a repayment plan for a substantial amount of the money owed. If you know that you’ll be able to repay your debts but you just need a little extra time, then a Chapter 13 bankruptcy can be beneficial.
- Finally, it’s important to consider how many other assets you have, and whether your claim will affect someone close to you who co-signed a loan. In most cases for a Chapter 7 bankruptcy, personal property including cars, your home, any extra real estate properties, and valuable personal items can all be taken by the court and used to pay off debts — and in many cases, any co-signers on loans will be forced to pay off the remaining debts, or else face penalties on their own credit scores.
Filing for bankruptcy is definitely not a fun process, and the consequences can last for a long time. But there’s no reason to feel embarrassed about it if you decide that it’s the right solution for you — with well over 1 million cases filed in 2013, you are far from alone.