There are many reasons people struggle with uncontrollable debt. Some examples include loss of employment, divorce, and medical bills. If you are struggling to cope with monthly debt repayments, you should know that you can seek relief from financial disaster by filing for bankruptcy. There are two different types of bankruptcy: chapter 7 and chapter 13. In this article, we will briefly outline some of the differences between the two types.
Chapter 7 bankruptcy is the best option for people who have no, or very few, assets. During this type of bankruptcy all debts can be completed eliminated apart from student loan debt, current taxes owed (state and federal) and certain judgments. What’s more, creditors are not allowed to contact you during the process, nor can they contact you after your debts have been liquidated.
The chapter 7 bankruptcy process can be very fast providing you hire a reputable Ontario CA bankruptcy attorney. In many cases, all debts will be discharged within six months. Assuming your filing is a success, all your credit card debt, car loans, personal loans, medical bills and more will be wiped out. That said, if any of your loans were taken out with a co-signer, it is not against the law for lenders to contact co-signers and try to collect on the debt.
Chapter 13 bankruptcy is for individuals and businesses with valuable assets, such as real estate, who are having temporary problems keeping up with unsecured debt obligations and don’t want to sell their assets to settle their debt. During the process, a trustee is responsible for consolidating all your current debts into one monthly payment and making the payment on your behalf using funds provided. You can’t file for chapter 13 bankruptcy until you have completed a mandatory financial management course.
After filing for chapter 13 bankruptcy, you typically have between 3 and 5 years to pay off your debts and during that time lenders are not permitted to contact you. You can generally keep almost all your assets during this type of filing and lenders cannot contact any co-signers to collect on your debts during the process.
The main advantage of chapter 13 bankruptcy is that it can prevent garnishments, repossession, and foreclosures. However, it is not without its drawbacks: the entire process can be very complicated and requires an experienced chapter 13 bankruptcy attorney Ontario CA. In addition, it is nowhere near as fast as chapter 7 bankruptcy and will remain on your credit report for ten years; affecting your ability to qualify for credit in the future.
Recovering from huge debts and financial disaster can be incredibly stressful. By choosing the right type of bankruptcy, you get the chance to start your financial life again, without the burden of unmanageable, spiraling debts. In 2015, over 840,000 people filed for bankruptcy in the US, so you should not be ashamed to explore the process if you are struggling to cope with escalating monthly repayments to creditors.