Most people have a passing knowledge of bankruptcy, but when you are considering it as an option for your financial future, you need to know all the details. It can be overwhelming at first to research this information. If you want to find debt relief and reclaim your finances, though, it is well worth the effort to find answers to your questions. Countless people gain financial freedom through bankruptcy.
It is important to enter the process as informed as possible. Do not rely on any single source for information, and do not trust all advice from family and friends. Empower yourself by asking questions and learning whether bankruptcy is the right option for you.
Effect on credit
One of the biggest concerns people have about bankruptcy is the potentially derogatory impact it will have on their credit score. It is true that filing for bankruptcy can take a big hit to your credit. According to The Balance, your score could drop anywhere between 150 to 240 points. Keep in mind, though, that debts which go into collection could be an even greater detriment to your credit score and finances.
Liquidation of assets
One common misconception about bankruptcy is the idea that one must liquidate all of their assets in order to file. This is not true. Chapter 7 bankruptcy — which allows for the discharge of debts — does involve liquidation of some assets, but there are still exemptions for certain property. In Chapter 13, repayment to creditors must at least equal the value of a debtor's nonexempt assets.
Chapter 7 or 13
Individuals considering bankruptcy may wonder whether Chapter 7 or Chapter 13 is the best choice for their financial situation. Both offer debt relief, but the details are different. In addition to the aforementioned liquidation that Chapter 7 involves, it also offers discharge of debts whereas Chapter 13 offers a repayment plan. Consulting with an attorney may help you decide which is best.