Filing for bankruptcy is a tough decision. It affects the individual’s credit rating, assets, and financial privacy.
However, although bankruptcy is a result of multiple economic struggles, it can also be beneficial. The Law Office of Davis & Jones, P.C. suggests bankruptcy filing as a more practical option to paying off overwhelming debts. It releases the individual from their debts. On the other hand, it also enables the creditor to obtain payment through the individual’s liquid assets.
The Bankruptcy Code dictates that a private individual petition for bankruptcy under Chapter 7, in which the creditor has the discrepancy to collect the individual’s non-exempt assets, or Chapter 13, in which a wage-earning individual can devise a time-constrained repayment plan. In the US, about 12.8 million consumers have filed for bankruptcy, from 2005 to 2017.
Medical bills are expensive and can easily wipe out an individual’s savings. Following the exhaustion of an individual’s funds such as retirement accounts and educational plans, they may be forced to borrow from institutions to settle the charges. Medical debt is the leading cause of personal bankruptcy in the US.
Divorce is a costly procedure. A divorcee can accumulate debt through legal fees, alimony and child support, and division of marital assets. Additionally, one of the divorcees may be left destitute when the other fails to give financial support.
Student loans, which cannot be discharged by federal courts, rank second among the consumer debt categories. However, quoting Wall Street Journal, Forbes said some judges are looking for ways to minimize the burden of the borrowers. For example, borrowers can settle with a repayment plan under Chapter 13.
Filing for bankruptcy is a tricky business. That is why an individual planning to declare bankruptcy will have to get an attorney. It may come at a cost, but with the help of a bankruptcy attorney, the individual can make informed decisions to compensate for the unfortunate ones.