Bankruptcy is federal law that was designed to give debtors a fresh start. Sometimes good people suffer catastrophic events, loss of jobs, loss of spouse, etc.… that lead to financial hardship and the need for a fresh start. Sometimes it is more simply stated that one is not able to manage their money and rely on credit cards to supplement their income. And apparently, sometimes there is a global pandemic that imposes a financial hardship upon you and your family that no one anticipated to occur just a few months ago.
Whatever the reason you have mounting debt, a consultation with a bankruptcy attorney is the most reasonable next step. Not every consultation ends with the filing of a bankruptcy. Depending on your situation, we explore all the options available to you, and then determine which option makes the most economic sense. Available alternatives to bankruptcy are refinancing your home to pay off the debts, liquidating an asset to pay off the debts, or negotiating settlements with all your creditors to pay off your debts. Notice that each of these alternatives include the phrase “pay off the debts”. You do not want to use one of the alternatives mentioned to pay down but not eliminate the debts as you have probably only delayed the filing of a bankruptcy. Alternatives to filing bankruptcy are only a good solution if they resolve the entire problem. If it is merely a band-aid, then it is mostly likely not the best financial decision.
Consequently, there are essentially two types of bankruptcy cases for individuals. The first is a chapter 7 and the most common, as you receive a discharge of the debts and do not need to repay the debts. The second is a chapter 13 and this the situation where you repay a portion of your debts over a period of time, typically 3-5 years. Once you have made all the payments, then you receive a discharge on the balances due.
If you’ve been laid off of work due to the Covid-19 pandemic and unsure if you’re able to manage your finances with mounting bills and debt, please contact us to discuss your options and whether filing for bankruptcy is right for you.