For individuals, there are two types of bankruptcy to file; Ch. 7 and Ch. 13. If you are buried in what seems like insurmountable amounts of debt, bankruptcy may be the right option for you. We are not attorneys and do not offer legal advice. If you think bankruptcy is your only option, we suggest you speak with an attorney to see if is your best option. But due to the devastating affect bankruptcy has on your credit and way of living, it is usually a last resort.
Here is a breakdown of the two types of personal bankruptcy most commonly used:
This method of bankruptcy is the most common form of bankruptcy in the United States. Chapter 7 can discharge all of your unsecured debt and give your finances the fresh start they need. Although Ch. 7 typically takes only 3 – 6 months to complete, it has a lasting effect on your credit. Usually it remains on your credit report for up to 10 years. Ch. 7 bankruptcy will not discharge most tax obligations or your Federal Student Loan debt. In recent years, Ch. 7 has become more difficult to qualify for since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 introduced a stricter qualifying process.
With stricter guidelines to qualify for a Ch. 7 bankruptcy, more people have been forced into Ch. 13 bankruptcy. Chapter 13 is referred to as a reorganization of your debt. Filing Ch. 13 means you repay some or all your debt on a repayment plan arranged by the court. Based on your repayment plan, some of your debts may even be reduced. Repayment plans are typically set for three of five year terms. The bankruptcy will still report on your credit for up to 10 year from when you initiated it.
Bankruptcy may seem like the easiest solution, but as we mentioned, the affects could be long lasting. Some bankruptcy attorneys have even been known to advise seeing if debt settlement is an option before proceeding with bankruptcy. Even if you are leaning towards bankruptcy, at least give Square One Financial Group a call to see if debt settlement is a better alternative. The advice we give is free, and if after you’ve heard what we have to say you still feel bankruptcy is the better decision then you’ll at least know you did your due diligence before proceeding.