If you are like the millions of Americans who are stuck in a seemingly never-ending cycle of debt, you are probably searching for a way out. You’ve done your best to meet your obligations, but you still may not be making any progress. Fortunately, there is hope. Bankruptcy can provide you with immediate relief from your creditors, and a pathway toward a fresh financial start. But before you make the decision to file for bankruptcy, it is important that you first educate yourself on some basic facts. Here’s a few key points on bankruptcy, including what you can do if you need help in this process.

What Is Bankruptcy?

Bankruptcy has several different types, but all forms provide a way for you to move forward financially. This is done by asking the court to let you start over with respect to your financial obligations by filing a bankruptcy petition and related documents. Depending on your specific situation, that may involve eliminating certain debts (chapter 7) or entering into a repayment plan to pay them off (chapter 13). Bankruptcy can also be used as a way to prevent garnishment of wages and bank accounts and to prevent foreclosures or repossessions.

However, there are consequences to filing bankruptcy which are generally outweighed by the benefits. Notably, your credit rating will take a hit. What this means is that filing for bankruptcy may make it very difficult for you to take out loans or buy things on credit for a couple years (two to three). Additionally, when you file for bankruptcy under chapter 13, you are giving some control to the bankruptcy trustee over how the repayment plan is structured and the amount you must pay each month. While a properly structured chapter 13 plan will benefit you in the long run, you will need to be patient while the case makes it way through the confirmation process.

Common Types Of Bankruptcy

The two most common forms of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy, also known as liquidation bankruptcy, is designed to help eliminate certain eligible debt by obtaining a discharge order from the court. While the vast majority of people who file for Chapter 7 are not required to sell any of their assets or property, there is a possibility that you may be forced to liquidate (sell) some of your assets in order to satisfy your debts. An attorney will explain which if any assets may be subject to liquidation before filing your case.

Chapter 13 bankruptcy, also known as wage earner bankruptcy, works by re-organizing all of your eligible debt and establishing a manageable repayment plan. Your repayment plan will usually last from three to five years, and you will be required to make monthly payments. In order to be eligible for Chapter 13, you must have a consistent source of income. By including any back mortgage payments (arrears) in your repayment plan, filing for Chapter 13 can be an effective way of keeping your home from being foreclosed on.

Credit Counseling

Before and after you file for bankruptcy, the law requires you to complete credit counseling educational courses (bothcourses.com). These courses are meant to provide you with information on how bankruptcy will affect your future, and to give you tips on how you can avoid financial ruin moving forward. Both the pre- and post-bankruptcy courses are offered throughout the country for a small fee. If you are unable to afford the fee, you may be able to have it reduced or waived by your local bankruptcy court.

Speaking With A Colorado Bankruptcy Lawyer

Bankruptcy is not something that you should enter into without preparation. A skilled bankruptcy lawyer can help you assess what is right for your circumstances and can recommend the best path forward for you. Consumer Law Pro is focused on helping clients resolve their financial dilemmas. Our skilled bankruptcy lawyers have assisted more than 2,000 people obtain the fresh starts that they were entitled to. We are here for you. To consult with Consumer Law Pro, call (303) 297-7729 or contact us online.