When you hear the word bankruptcy, you are most likely to think of something terrible — an overwhelming amount of debt, being financially ruined, or having everything taken away from you. However, there are can be some pros to filing for bankruptcy. You should also know that the laws for bankruptcy are always changing, so you want to make sure you’re up to date on the most recent laws passed, in order to keep from unnecessarily filing for bankruptcy or being taken advantage of. While there are six different types of bankruptcy in the United States, there are two that apply to the general public, while the other four are more specifically geared towards a group of people or professions.
What Is Bankruptcy?
Bankruptcy is a legal term, referring to an individual or a business who can’t repay a debt (or series of debts) they owe to the individual or entity that loaned them the money in the first place. Like previously mentioned, there are six different kinds of bankruptcy, but most people have to deal with either Chapter 7 or Chapter 13 bankruptcy. If you file a chapter 7 bankruptcy, this refers to straight or liquidation bankruptcy, which is the simplest and quickest form. Your assets are taken and the money received for those pays off the money you owe to your creditors. Filing chapter 13 bankruptcy gives people who are earning a steady wage a chance to create a plan that lets them pay back their debt in part or in full. However, it’s good to be aware that the laws for bankruptcy are always changing, so you want to be sure you know the specific details of which one you’re filing for.
What Are Some Of The Causes of Bankruptcy?
Now naturally, filing for bankruptcy means you’re already struggling to pay your bills — it comes down to money. But there’s a common misconception that people who file for bankruptcy are just lazy or don’t care. This is in most cases not true. Some common causes of bankruptcy are people losing their jobs, huge medical bills, or bad money management.
Health care is the number one cause of bankruptcy — almost 2 million people have to file every year because of their unpaid medical bills. Indeed, in 2014, half of those filing for bankruptcy had a very grave health condition. Unemployment is another reason — also in 2014, two out of three people filing had been recently unemployed and couldn’t make ends meet. These are situations out of people’s control. Other common causes include credit card debt or mortgages that weren’t paid.
What Are The Impacts of Filing For Bankruptcy?
Your credit score will definitely be impacted, which may make it harder for you to obtain financing in the future for home or car loans. In addition, your home and car may also be seized, which makes it difficult to rebound and start again. It’s a difficult and tricky process, so you’ll definitely want to try and hire some kind of bankruptcy attorney who can help guide you through the twists and turns. And since the laws for bankruptcy are always changing, you want someone who is up to date and knowledgeable.