We have covered many of the popular tactics for reducing one’s debt. If you have tried the tactics for paying down your bills, such as snowballing your debt payments, paying more than the minimum, and working with your creditors to create more reasonable payment plans but still find it impossible to get your debt covered, it may be time to consider bankruptcy.

Bankruptcy is the Real Deal

Some make the mistake in believing that bankruptcy is the easy way out from under debt. The reality is that your are morally obligated to pay back the debts you have created and there is really no method for just burying all of your debts without consequence. Resorting to bankruptcy certainly should be your last resort and used only when repayment of your debts has become impossible. While bankruptcy may relieve some of the stress of making payments and paying down debts, it does have some consequence that you should consider before jumping the gun and filing your paperwork.

What Are the Differences?
First, let’s review the differences between the two types of bankruptcy you can file. There is Chapter 7, which essentially discharges nearly all of debts. Chapter 7 bankruptcy will not get rid of financial obligations such as taxes, alimony, legal judgments, and student loan payments. Chapter 7 may also require that you give up your personal property in order to satisfy your debts, depending on the laws in the state where you reside.

Chapter 13 bankruptcy differs from Chapter 7 in that you turn over control of your finances to a bankruptcy court. It is the court who will create and approve a repayment plan based on the petitioner’s resources and within a time span of between 3 to 5 years. During the repayment time, you will not accumulate interest charges and creditors are not allowed to solicit you for payments. Once your payment plan is satisfied, you will come out of the bankruptcy debt-free.

Is It For You?

Bankruptcy is not for everyone. There are consequences and it is definitely a process. Sounds strange but it costs money, sometimes a lot of money, to file bankruptcy. With the involvement of lawyers, court fees, and the time it takes to get your financial situation in order, you will likely spend a few hundred dollars and in turn may lose hours at work getting things taken care of. Both choices of bankruptcy will also remain on your credit report for 10 years. Those who choose to file for bankruptcy will likely continue to have issues getting credit during the 10 year period. And, as times have changed, no everyone will be qualified to file bankruptcy and may still end up having to pay on debts that do not qualify for bankruptcy relief.

There are a lot of factors that you will need to consider before jumping into bankruptcy. Do what you can to bring down your own debt balances and work to do it on your own before considering bankruptcy.

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