Notwithstanding fortunate exceptions, there’s no denying that the past two years have been a rough time for businesses and individuals alike. An increasing number of people are facing overwhelming debts that have piled up in the wake of the pandemic-related hiatus.
Sometimes the total amount due is too much to reasonably hope to deal with. If this is the case, bankruptcy might prove a welcome last resort, especially when curated by a professional debt relief company such as DebtStoppers.
Bankruptcy as a Solution
In spite of the predominantly negative connotation historically associated with bankruptcy, the procedure of declaring your inability to repay your debts can turn out highly beneficial depending on the situation. Consider this option if:
- your income has been so limited recently that you cannot expect to repay the outstanding amount in a more or less timely manner;
- your creditors deny negotiations;
- you face aggressive claims from your creditors such as endless phone calls or even threats;
- you have tried credit management and/or settlement with little or no success.
Your further decision should be guided by the particulars of your financial standing as detailed below.
Chapter 7 vs. Chapter 13
The US Bankruptcy Code provides for two major procedures to be applied when an individual proves incapable of repaying his or her debts.
Chapter 7 of the above Code describes what is known as liquidation bankruptcy. It is generally considered the less favorable scenario of the two because it involves selling nonexempt property towards the outstanding amount. Yet, it can spare you burdensome liability in the future and clear your debt balance. The process usually takes up to five months. Both individuals and businesses can apply.
Chapter 13 stipulated an individual-only procedure for reorganization bankruptcy. In this case, you are expected to pay according to a court-mandated schedule for three to five years in return for keeping your property.
Applying for Bankruptcy
Gathering the necessary information to apply for bankruptcy might be both confusing and time-consuming, and deciding on the right solution is difficult unless you have a deep understanding of finance. This is why people often delegate the task to trusted debt relief companies. Such organizations will consult you and assess your situation in order to pick the best solution. They also assign a professional to represent you in all court proceedings.
Of course, the support is not free of charge, nor is it indispensable. However, most cases are so complicated that undertaking to solve them on your own would almost inevitably prove a waste of time, which truly is money when it comes to outstanding debt. Engaging a trusted expert to take up this role is thus highly advisable.
The Effects of Bankruptcy
The most common concern when it comes to bankruptcy is related to the credit score. Known failure to repay your debts does affect your potential as a creditee, but this effect is limited to seven years if you apply under Chapter 13 and ten years for Chapter 7 applicants.