Getting into debt is fairly easy because it is so tempting to think that you can just pay everything off later. Even when the debts are due to medical bills or other situations beyond your control, the stress of knowing you owe a huge amount is still the same.
One option that you have to get out of debt is to file for bankruptcy. Some people are eligible to file for Chapter 7 bankruptcy, which means that your assets are liquidated and any remaining debts are forgiven. Not everyone is eligible to file for Chapter 7. If you aren't eligible for Chapter 7, you will likely file Chapter 13. Here are some points you need to know if you are filing for Chapter 13 bankruptcy.
You will repay some debts
Chapter 13 bankruptcy is known as the working man's bankruptcy because you will have to make payments to repay your creditors. You work with the bankruptcy trustee to make this happen. The trustee determines what you can realistically pay and sets you up on a plan based on that information. You will usually have payments due for up to five years. Things will be tight during this period, but the financial freedom at the end of the process will be worth it.
You have to give up your credit cards
You will have to part ways with your credit cards, but this is a good thing. Not having credit cards gives you a way to learn to rely only on money you have. This skill can help you to stay on a budget and avoid future financial difficulties.
You can keep certain assets
You will be able to hang onto certain assets. You might be able to keep your home, but you will have to make sure that you make the payments as required. You may have to part with some assets, but these will be considerably fewer than you'd have to part with if you filed for a Chapter 7 bankruptcy.
Your credit report will take a hit
Even though you are repaying a portion of your debts, the fact that you had to file bankruptcy will be on your credit report. This does have a negative effect on it and can prevent you from being able to get a mortgage. Of course, this isn't going to be much of an issue if you already have a mortgage.
You might be able to file again
One good thing about Chapter 13 bankruptcy is that you will likely be able to file for Chapter 13 again if it is necessary. You won't be able to file Chapter 7 bankruptcy for six years. If something happens and you need bankruptcy protection, you might be able to file immediately, but there is sometimes a 180 day waiting period. This waiting period is usually associated with a bankruptcy that is dismissed at your request because of a creditor's petition to seek relief from the automatic stay or because of a dismissal that was due to a violation of a court order.