If you face the crush of too many bills with no way out, bankruptcy may prove an effective way to get a do-over. Understanding how the process works are something that may help you get past any misgivings about it.
Bankruptcy allows you the chance to get control of your finances by legally wiping out some of the debt. Regardless of the type of bankruptcy you file, the court process remains similar. Find out more about the basics of bankruptcy before moving forward.
Filing with the court
One of the immediate benefits of filing for bankruptcy is it puts creditors on notice of the pending action. Legally, they have to stop trying to collect from you. They cannot contact you in any way, nor can they continue litigation against you. Creditors have to now go through the court-appointed trustee to try and stake a claim.
Selling or repaying
The type of bankruptcy you file dictates the next steps in the process. Chapter 7 involves a liquidation of your assets. This means you have to sell certain non-essential items to cover some of your debts. Chapter 13 bankruptcy consists of a payment plan calculated by your income. It allows you to keep all of your property but forces you to make monthly payments for three to five years.
Discharging
Once the court feels satisfied that you have completed the terms of your bankruptcy, the judge discharges your debt. This includes bills not paid off during bankruptcy. Some debts may remain, such as your mortgage, but your account should return to good standing.
Bankruptcy is one route in a quest to get yourself back in a better financial position. Doing so may put you on a less stressful course.
