Most people have been taught from an early age to pay their debts. It is ingrained in children from an early age. This training makes for financially responsible adults, but these same responsible adults can get themselves into trouble when faced with a massive amount of debt they simply cannot pay. When you are considering draining your retirement account to pay off a credit card debt, it is time to stop and reassess. Yes, ideally every financial obligation could be met. You could sacrifice all of your luxuries and slowly dig yourself out of a mountain of debt, but sometimes that is just not possible. When this is the case, it is time to consider filing for bankruptcy.
If you have a regular income but are unable to meet your financial obligations at this time, chapter 13 bankruptcy might be your best option. Unlike chapter 7, those who file for chapter 13 bankruptcies are allowed to keep their assets. Chapter 13 bankruptcy is a court ordered restructuring of debts. This process can stop the foreclosure and repossession processes. In fact, it is designed to stop all collection efforts by your creditors. This means those seven o’clock phone calls threatening wage garnishment also stop.
In order to claim bankruptcy, a bankruptcy petition must be filed. This normally results in the courts issuing an automatic stay, stopping all collection efforts and foreclosure or repossession proceedings. A notice is sent to call creditors, and a trustee is assigned to the case. Within 15 days of the filing of the bankruptcy petition, a commencement of case notification will be sent to all parties. The creditors will meet and file any claims or objections they might have. The court will then prioritize the petitioner’s debts and determine a suitable plan based on expense-to-income ratio to repay the debt. This plan will cover a period of 36 to 60 months. During that time, the petitioner will be expected to make timely payments. If all payments are made on schedule, there is a possibility all remaining unsecured debt will be discharged at the end of repayment plan.
Chapter 13 bankruptcy is not a way to run out on your obligations. It is a way to make paying those obligations manageable. Forget the stigma attached to bankruptcy. You are not a deadbeat. You just need an opportunity to repay your debt without the fear of losing your home or means of getting to work. Sometimes, bankruptcy is the first step towards becoming financially responsible.