When Colorado residents get deep in debt, there often are no easy solutions. The situation can be scary, as bills continue to mount, while a person's home, car and other assets are at stake of being foreclosed upon. In these instances, individuals may wonder if filing for bankruptcy is right for them.
For some individuals, personal bankruptcy may not be necessary to eliminate debt. Financial counselors, and even lenders, may work with debtors in order to refinance debt or find mutually beneficial payback plans. Yet, this is not an option for many individuals who do not have enough income to live and repay their debt at the same time.
The first step for these individuals is to be aware of their options in bankruptcy, as Chapter 7 bankruptcy and Chapter 13 bankruptcy have different advantages and disadvantages, as discussed previously in this blog. Debtors will want to make sure they fit the eligibility requirements for the particular type of bankruptcy they are looking to file.
At the same time, individuals should look toward the type of bankruptcy that will allow them to discharge the type of debt they have. For instance, while child support is not typically dischargeable in bankruptcy, credit card debt may be wiped out.
Finally, individuals should ensure their home, car or other assets they wish to keep are safe. Chapter 7 and Chapter 13 treat certain assets differently in terms of whether a person can hold on to the asset, and therefore it is essential that individuals know this heading into the process. Ultimately, by doing some research and meeting with a qualified bankruptcy attorney, individuals can determine what type of bankruptcy is best for them.
Source: Redding.com, "Debt adviser: how to handle $40,000 in credit card debt and a mortgage," Steve Bucci, Mar. 31, 2013