If there ever comes a point in which you realize that you are drowning in debt, you have to figure out what you are going to do about it. You have a few options here. You can ignore the fact that you owe money and continue on with your life, but this might come with suffocating collection attempts by the creditors. You can struggle to make the minimum payments and seemingly never make it out of the deep hole of debt. You can file for bankruptcy and walk away at the end with a fresh financial start.
If that last option sounds refreshing, remember that filing for this protection isn’t without some decisions and sacrifices. One of the first things you will have to determine is what type of bankruptcy you need to file. Consumers usually file either Chapter 7 or Chapter 13, depending on their circumstances and needs.
In Chapter 7, your nonexempt assets are liquidated by the trustee to pay off creditors. While this is a much faster option than Chapter 13, it doesn’t provide you with the opportunity to catch up on missed payments so you can avoid repossession or foreclosure. Chapter 7 usually takes three to five months to receive a discharge.
In Chapter 13, you make payments to the court for three to five years, depending on the payment schedule. You may be able to hold on to more assets than in Chapter 7, but you must ensure that the payments are made on time. This option takes longer because your case isn’t discharged until you make the final payment to the bankruptcy court.
There are other points that you will need to figure out for these, such as the means test for Chapter 7 and debt limits for Chapter 13. Understanding all of the applicable points prior to filing is imperative.