Eliminating Debt In Bankruptcy: A Layman’s Guide

The burden of debt is an overwhelming feeling that can take a toll on the lives of individuals. The inability to pay off debts, whether through loans, credit cards, or medical bills, can lead to constant calls from creditors and legal action. Fortunately, there is a solution available in the form of bankruptcy. Bankruptcy is a legal process that helps individuals and businesses eliminate their debt or repay it under the protection of the federal bankruptcy court. In this blog post, we will delve into the basics of eliminating debt in bankruptcy and provide a layman’s guide on how it works.

Types Of Bankruptcy

There are different types of bankruptcy that an individual can file depending on their unique situation. Chapter 7 bankruptcy is a type of bankruptcy that allows individuals to eliminate most of their unsecured debts such as credit card bills and medical expenses. However, it requires the individual to give up any non-exempt assets, and it may not discharge all debts. On the other hand, Chapter 13 bankruptcy is a type of bankruptcy that allows individuals to reorganize their debt and make monthly payments for three to five years. This type of bankruptcy protects assets and discharges unsecured debts at the end of the payment plan.

How To File Bankruptcy

Filing for bankruptcy begins by submitting a petition to the bankruptcy court in the district where you have lived or had your principal place of business. The petition includes information such as assets, debts, income, and expenses. It is also essential to note that filing for bankruptcy requires a fee, and individuals should be prepared to provide all necessary financial documentation. After filing the bankruptcy petition, an automatic stay goes into effect, which stops any creditor from attempting to collect any debt from the individual.

Impact on Credit Score

One of the significant concerns that individuals may have when considering bankruptcy is the impact it could have on their credit score. Undoubtedly, filing for bankruptcy will result in a significant hit to the individual’s credit score, affecting their creditworthiness for a long time. However, it is important to note that this impact is temporary, and it is possible to begin rebuilding credit after filing for bankruptcy. By adopting sound financial practices, such as paying bills on time and using credit responsibly, individuals can gradually improve their credit score.

Seeking Professional Help

Navigating bankruptcy proceedings can be a complicated process with many legal technicalities. Therefore, it is advisable to seek the assistance of a bankruptcy attorney who can provide guidance and representation throughout the process. A bankruptcy attorney can also provide insight on the type of bankruptcy that is best suited for your unique situation, help with filing the necessary petition, and represent you in court if needed.

Eliminating debt in bankruptcy can be a viable solution for individuals struggling to stay afloat under a pile of debt. However, it is essential to understand the different types of bankruptcy, the filing procedure, and the potential impact on credit score. By seeking the assistance of a bankruptcy attorney, individuals can navigate the legal process with ease and begin to change their current financial circumstance. Remember, bankruptcy is a fresh start, not the end.