Financial challenges and the accumulation of debt can be a source of stress that affects the whole family. Fortunately, the law has created a remedy for those in need of a fresh financial start. Bankruptcy can be the necessary and helpful option for Birmingham families who are suffering from too much debt.
Individuals can file bankruptcy in order to extinguish debt or negotiate repayment with creditors. There are two types of bankruptcy available for consumers: Chapter 7 and Chapter 13. The type and amount of debt owed and current income levels will determine which type of bankruptcy is most appropriate in an individual case.
If the debtor qualifies for a Chapter 13 Bankruptcy because of their income level, the court may require that person to file under Chapter 13. While this type of bankruptcy focuses on repaying creditors over time, Chapter 7 utilizes asset liquidation to pay back creditors. Under both bankruptcy options, individuals are able to discharge large shares of certain types of debt.
Though bankruptcy often provides necessary relief, there are some ways to avoid typical pitfalls for those who file bankruptcy.. One thing to consider is that bankruptcy will likely affect a person's credit score when the bankruptcy is included on their credit report.
Suggestions to prevent bankruptcy -- or repair credit after bankruptcy -- include: living within one's financial means, and not above them; eating at home rather than eating out; hold a garage sale for items that you no longer use or need; develop a budget and financial plan; and close credit cards and negotiate an agreeable payment plan with the companies.
Even if these suggestions are followed, bankruptcy may still be the only realistic way for some families to obtain debt relief during these tough economic times. An experienced bankruptcy attorney can advise a person if it is the appropriate solution for their individual debt problem.
Source: The Day, "Ways to Avoid Bankruptcy-Ideas to Prevent Bankruptcy," Nov. 8, 2012