These days, many people find themselves in a large amount of debt, and this is partly because it is so easy to get credit these days compared to in the past. We are continually bombarded with credit card invitations, loan advertisements, and a whole host of tempting goodies that we can buy on credit. It’s therefore no wonder that many individuals and households find themselves in more debt than they can manage. Many people often find their monthly expenses exceeding their monthly income.
Debt can have serious consequences in more ways than one. Not only can it leave you financially crippled with a very bleak financial future, but it can result in both physiological and psychological illnesses and can even tear families apart from the stress that it can cause. This is why it is vital for those who find themselves in large sums of debt to take action before things get out of hand. Ideally, those in debt should act as soon as they realize that they are struggling to make repayments. There are a number of ways to do this:
Informal arrangements: You can negotiate with your creditors (banks, credit card companies, loan companies, etc.) and come to some agreement about reduced payments on your debts. This will enable you to get back on track and live life without having to juggle your repayments around.
Negotiation: You can negotiate the balance of your loan with your creditors by offering to pay a lump sum in order for the interest to be frozen or for the total balance to be reduced. In order to do this you normally have to have missed some payments.
Debt management company: You can go through a debt management company, and a trained professional can go through your budget and help you formulate a plan for effective repayments that you can afford. The management company will normally negotiate debts on your behalf so that you can enjoy lower, more affordable repayments.
Credit Counselling service: Again, a trained counsellor can help you to formulate a more manageable repayment plan, and can contact creditors on your behalf in order to bring your monthly payments down.
Although the above methods can be effective for those that find themselves getting deeper into unmanageable debt, for some it is already too late. Many people find themselves in a huge financial mess from which there seems no way out. In these situations, bankruptcy is often the most sensible answer. Although it is best to take action before it gets to the stage where you have to consider bankruptcy, this is another option for those that are already in too deep.
There are a couple of different options when it comes to filing for bankruptcy, and by going to an experienced lawyer you can find out more about whether bankruptcy is the best option for you, and if so what type of bankruptcy will best suit your needs. The two main types of bankruptcy are:
Chapter 7 bankruptcy: This is the most common type of bankruptcy proceeding used by individuals. All of the assets of the debtor are put into liquidation, and the proceeds used to pay off as much of the outstanding debt as possible. However, there are certain assets that are exempt under chapter 7 bankruptcy (subject to state or federal law) and these can include your car, your house, your work tools and trade, and a number of personal items.
Chapter 13 bankruptcy: About a quarter of those filing for bankruptcy file for chapter 13. This is where a payment plan is formulated with the debtor’s creditors and payments are made towards the debts. Although the creditors may not receive repayment in full, they usually get more under chapter 13 bankruptcy than they would under chapter 7. Providing the debtor adheres to the repayment plan, he or she gets to keep the home and other assets. However, this can be reverted to a chapter 7 in the event that the debtor defaults on repayments.
There are also other types of less commonly used bankruptcy types that have specific criteria. For example, chapter 11 bankruptcy is available for businesses that wish to file for bankruptcy, and chapter 12 bankruptcy is designed for farmers that have real estate debts.
Whatever your situation, an experienced bankruptcy lawyer will be able to offer advice, assistance and support. It is best to go with a more experienced bankruptcy lawyer, as he or she will have the necessary skills, resources and knowledge to ensure that you file for the type of bankruptcy that will prove most beneficial to you in terms of loss of assets and lower repayments. The lawyer will aim to keep your payments low and to help you to hold on to as many assets as possible. By evaluating your case and collating the facts, he or she can determine which bankruptcy type is likely to leave you better off in terms of finances and assets.
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