If a person has a problem paying their debts, they might want to consider bankruptcy as an alternate way to deal with their financial problems. To make sure that bankruptcy is a doable choice for any person who is considering this process, it is imperative that they contact a lawyer for legal counsel and to really see if filing for bankruptcy is the best option for them. A bankruptcy lawyer would know the in-and-outs of the different bankruptcy protections and they could advise the client on the best course of action for their situation.
Bankruptcy has two types of options in which you can file: chapter 7 and chapter 13. In chapter 7 (also known as “fresh start” or “liquidation” bankruptcy) the person’s debt is discharged, but they must give up any nonexempt property,for example a family heirloom or a second vacation home, to the trustee to pay their creditors. In chapter 13 (known as “reorganization”) bankruptcy, it allows the person filing to keep valuable property, such as a car, which they might of lost if they had overdue payments.
In this type of bankruptcy their is usually a payment plan that is associated with the creditors, so the debtor has sometimes even three to five years to pay back their debts. There are also some things bankruptcy can and can’t do. For example bankruptcy can eliminate most if not all of the person’s debt, it can stop the repossession of a property, and it can stop the debt collection harassment. Bankruptcy can not discharge some type of debts such as student loans, and child support.
After a person files for bankruptcy they will be able to start rebuilding their credit almost immediately. The person would still have a bad credit rating, but it is possible to rebuild it using various strategies. Over the years more credit options will be available to the person and eventually (if they don’t make any major mistakes) they will go back to an average or better credit rating.