What should you know if you’re considering bankruptcy?

On Behalf of | Oct 26, 2022 | Uncategorized

Deciding to file for bankruptcy should never be taken lightly by Michigan residents. However, if other options for alleviating debt are out of reach, there are things that should be done before, during and after you file.

Determine if it’s the right option

Bankruptcy might be the right option for you based on your situation. If you’re being bombarded by collection calls and harassed by creditors threatening to sue you, it’s probably appropriate to file. Going through a divorce and being at risk of foreclosure on your home are other scenarios that might make bankruptcy a good option.

Acknowledge whether you’re paying off debt from one credit card with another. This is a vicious cycle that isn’t really a solution, so bankruptcy could help. You might also need to file if you’re desperate enough to consider withdrawing funds from your retirement account.

Once you’ve concluded that you need to take the bankruptcy route, you have to attend credit counseling and obtain your bankruptcy certificate, which allows you to file. You must also attend a debt education course, which provides you with a separate certificate upon completion.

Know which type of bankruptcy is right for you

Depending on your financial situation, you might be better off filing for one type of bankruptcy over the other. Chapter 7 bankruptcy is appropriate for individuals who have modest incomes and little to no assets while Chapter 13 is available to those with more money who could repay debts if given more time.

Taking the means test can help you know which type of bankruptcy is right for you. Chapter 7 allows you to liquidate your debts and assets, but not everyone qualifies. Chapter 13 reorganizes debts so that you can pay them back within three to five years.

Knowing what to expect during all stages of bankruptcy often helps relieve your stress. It also lets you maintain better control over your finances.