Do you find yourself struggling to pay your debts each month? You can deal with debts in several ways, from declaring bankruptcy to consolidating your credit cards. Each option has pros and cons, and you should be aware of them before considering your options. Some options erase a portion of your debt, while others reduce the fees associated.
If you choose a method that does not fit your situation, you can ruin your credit or pay unnecessary fees trying to get out of debt. Find out more about your options to get out of debt.
You may have heard that you do not have to pay your debt if you file for bankruptcy, but that is not completely true. Depending on which bankruptcy chapter you file, you will still need to pay most to all your lenders, and you will have to sell some of your personal belongings.
Chapter 7 requires you to sell many of your property and belongings to pay back creditors. This chapter filing requires you to sell possessions that are not exempt. The court will appoint someone to sell your property and use the proceeds to repay your creditors.
For instance, you might have to sell a boat, second vehicle, or vacation home. You will not have to sell your primary home, car, clothing, household goods, or items that relate to your profession or how you earn a living.
Chapter 13 is a plan to pay back most-to-all of your debt because of your steady income. Most court-ordered plans are between three and five years.
Bankruptcy should be your last option. It is a court proceeding and ruling stating that you cannot pay your bills. Filing bankruptcy severely impacts your credit score for the next seven to ten years. You should only consider bankruptcy if you have absolutely no way of paying your debts because your financial responsibilities are more than your income.
Declaring bankruptcy will not erase your debt. The government cannot forgive certain debt types, such as alimony, child support, student loans, and back taxes. You might need to think of an alternate solution if these types make up the bulk of your debt.