Did you know about 14 percent of U.S. households owe more than they own?
If your liabilities are greater than your asset, filing for bankruptcy could be the solution that you’re looking for. Depending on the type of bankruptcy, some of your debts could be written off and others could be restructured. Either way, it’s a way to get lenders off your back and property at least for a certain period of time.
However, bankruptcy has major consequences on your financial well-being. A bankruptcy will stay on your credit report for at least seven years, for instance.
The good news is bankruptcy isn’t a life sentence. You can rebound and thrive again. Read on for a guide on how to rediscover your financial fitness.
Understand Your Bankruptcy
There are different types of bankruptcy, with Chapter 7 and Chapter 13 being the most common.
Chapter 13 is ideal for individuals who have secured debt but also have a regular wage. It’ll allow you to rework an alternative repayment schedule that suits the current state of your finances. You’ll keep your property.
Chapter 7 is ideal for individuals who have lots of unsecured debt, such as credit cards, medical bills, and personal loans. Most unsecured debt can be discharged after a successful filing. Check out https://obryanlawoffices.com/bankruptcy-attorney/types-of-bankruptcy/chapter-7-bankruptcy/ for more insight.
Having a good understanding of your bankruptcy enables you to know what you can and cannot do. For instance, if you file for chapter 7, you’ll know that you’ll no longer be responsible for at least some of the debt you had since unsecured debt is usually discharged. But if it’s Chapter 13, you’ll know that you’re still in debt, only with new repayment terms.
Avoid the Mistakes That Got You Here
Some people end up bankrupt because of no mistake of their own making. For example, if you develop a serious illness that requires specialized treatment, it’s possible that your medical bills can wipe out your health insurance and balloon beyond your wildest imagination. In 2019, two-thirds of people who filed for bankruptcy cited medical issues.
Other people end up bankrupt because of financial indiscipline. You’ve heard of actors and athletes who blow their millions on expensive homes and lavish lifestyles and end up in debt.
Regardless of how you found yourself bankrupt, strive not to repeat the same mistakes. If it’s an illness, get better coverage. If it’s financial recklessness, change your ways. This is the time to embrace a frugal lifestyle.
Get Professional Help
Your finances are tight. The last thing you want is to spend whatever little you have on a personal finance advisor. This is understandable.
However, there’s a strong case for getting professional help. A financial expert will assess your financial situation and help you better financial decisions. The cost will be worth it.
You Can Rise from Bankruptcy
For most people, filing for bankruptcy is an embarrassing and depressing time. While it has big consequences, it’s probably the only option at your disposal. However, it’s not all gloom and doom. You can rise from bankruptcy and reach a new, better financial life.
Keep reading our blog for more personal finance advice.