With the New Year upon us, it’s important to consider all of your options for getting out of debt. Bankruptcy can be a powerful tool for relieving debt and providing much-needed relief from creditors, but it’s not a decision to be taken lightly.
How do you know bankruptcy is right for you and what can you do to ensure the process runs smoothly?
Overview of Bankruptcy
Before we get into when you should consider filing for bankruptcy in 2023, let’s first review what bankruptcy is and what it entails.
Bankruptcy is the legal process that allows individuals or businesses with overwhelming debt obligations to reorganize their finances to pay off creditors over time. The most common types of bankruptcies are Chapter 7 and Chapter 13. Both involve liquidating assets to pay off debts and can help you reduce or eliminate certain debt obligations.
Benefits of Filing for Bankruptcy in the New Year
Filing for bankruptcy in 2023 may provide several benefits, including:
- Stopping creditor harassment
- Preventing wage garnishment or bank account levies
- Halting foreclosure proceedings
- Helping you avoid having your wages attached by creditors
It can also help you get back on track financially by allowing you to create a manageable plan for paying off creditors over time. Furthermore, filing for bankruptcy may also prevent lenders from increasing interest rates on your existing debts or charging late fees on overdue payments.
How to Prepare Financially Before Filing for Bankruptcy
It’s important to prepare financially before filing for bankruptcy to maximize the chances of success with the process. This includes gathering all necessary documents related to your financial situation such as income statements, expense reports, tax returns, credit card statements, mortgage papers, loan agreements, etc., as well as preparing an accurate budget that outlines all sources of income and expenses.
Additionally, it’s important to research different types of bankruptcies so that you can make an informed decision about which option is right for your particular situation.
What Types of Debt Can Be Discharged Through Bankruptcy
Not every type of debt is dischargeable through bankruptcy. Forms of debt considered “non-dischargeable” include:
- Student loan debt (in most cases)
- Child support payments (unless agreed upon between both parties)
- Alimony payments (unless agreed upon between both parties)
- Taxes (in most cases)
It’s also important to note that you cannot discharge certain secured debts through bankruptcy either. These include mortgages or car loans where collateral has been used as security against repayment. However, these loans may be restructured through other means such as refinancing or loan modification programs offered by lenders.
Should I File for Bankruptcy in 2023?
Filing for bankruptcy isn’t something anyone looks forward to. However, it can be a viable option if you find yourself facing insurmountable amounts of debt and no other way out from under them without damaging your credit score even further than it already is.
There are risks associated with filing for bankruptcy. It negatively impacts your credit score. You might struggle to get a loan in the future. Despite these drawbacks, there are many benefits. Whether you need to stop creditor harassment, discharge debts, or any other solution that can help you rebuild financially, a bankruptcy attorney can help.