Many people struggle with the idea of filing for bankruptcy because they believe it’s the easy way out. They think that it is lazy or that it cheats the system.
The reality is that bankruptcy is designed to help people who are struggling financially. Whether that’s due to personal mistakes in handling finances, losing a job or medical expenses makes no difference. A bankruptcy helps people get back on their feet and eliminates unsecured debts to help them do so.
Won’t you lose everything in a bankruptcy?
Some people mistakenly believe that they’ll lose everything if they file for bankruptcy. First of all, if you choose a Chapter 7 liquidation bankruptcy, there are exemptions for many of the things you own. While some of your assets might be sold, the reality is that few people see everything they own taken from them. The purpose of bankruptcy isn’t to make you start over completely; it’s designed to help you keep necessities and move forward without debt.
If you file for Chapter 13 bankruptcy, you won’t lose anything. Instead, you pay back creditors each month with a lump-sum payment. The payment may be less than what you pay to them now, and since it’s manageable, you’ll be expected to pay it over the course of three to five years. As long as you pay on time for that length of time, you’ll emerge from the bankruptcy at the end of the three- or five-year term with any remaining debts discharged.
Our site has more on bankruptcy and what you need to know if you’re struggling with debt.