When Is It Good to File for Bankruptcy?
According to Lawyers.com, "a discharge in bankruptcy means that your personal liability for a debt is eliminated." They further explain that "discharge also acts as an injunction against collection efforts; this means creditors can no longer try to collect the debt," ending repeated collection calls and mailings.
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Considerations
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When determining whether to file for bankruptcy, debtors should assess the type of debts on which they owe, along with the amount of their debts, other financial obligations and whether they have enough disposable income to make regular payments to their creditors.
Types
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Chapter 7 bankruptcy is income-restricted and eliminates debts by liquidating the debtor's personal property. People who don't qualify for Chapter 7 bankruptcy, but have regular income, may have their debts restructured in a way that will allow them to make regular payments to their creditors.
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Benefits
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Chapter 7 bankruptcy allows debtors to discharge credit card debts, medical bills, personal loans, business debts and leases.
Prevention/Solution
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Debtors may be able to avoid filing bankruptcy by working with a credit counselor or debt management service to negotiate lower payments and reduce interest rates.
Warning
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Bankruptcy will not discharge many types of debts, including child support and alimony, student loans, restitution and criminal fines.
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References
- Photo Credit credit-card image by Igors Leonovs from Fotolia.com
