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Debt Relief and Bankruptcy

Many people who are looking for debt relief often view bankruptcy as a viable option. They see the so-called “nuclear option” of going through a costly and damaging bankruptcy proceeding as the best option available to them. And for some, it probably is. But bankruptcy was never designed to be a fix-all for debt problems. It was put into place for people who, through extreme situations, are completely unable to pay back the debts that they have incurred.

Bankruptcy can always be considered when it comes to debt relief, but it should be considered very carefully before any options are decided upon.

Considering Bankruptcy

When it comes to debt relief, knowledge is power. Finding quality legal advice is a very good first step. Professionals that understand the workings of the legal system are the best sources for advice and can help you decide if bankruptcy is the correct option for you and your situation. While it may be easy for an individual to believe that bankruptcy is the only option available, it oftentimes turns out not to be.

Types Of Bankruptcy

If you do decide that bankruptcy is the best option for debt relief, then it is time to figure out which type of bankruptcy fits your situation and circumstances.

In most cases, a Chapter 7 (or “Straight bankruptcy,”) filing is the most common option for individuals. By liquidating assets to repay debtors, the debt incurred in most cases is removed. However, there are some assets protected from liquidation and some forms of debt cannot be repaid or removed through this form of bankruptcy.

Since the bankruptcy reform of 2005, there are more legal qualifications needed to qualify for a Chapter 7 bankruptcy. A knowledgeable and certified legal source can help you through these questions and problems.

There is also the Chapter 13 (or “Reorganization,”) filing. Overseen by a federal bankruptcy court, it allows indebted individuals to reorganize their debts in an attempt to repay creditors and enact debt relief. The court’s purpose is to help individuals come up with a plan of action to repay the debts they have incurred. The filers must, at a minimum, come up with a plan to use every cent of disposable income to repay debts or liens.

Bankruptcy, whatever the method, can have serious and life-long repercussion. It is not an action to jump into lightly, and you should meet with professionals to determine the best course of action for you. There are other forms of debt relief that do not include bankruptcy, and those options may be better for many individuals. Like any other legal matter, proper research, planning and analysis is needed to find the correct answer for your unique situation.