If the bills just keep coming in and there isn’t enough money to pay off your debts, it is time to consider your options. No one likes having to file for bankruptcy and although it may seem like the easy way out there are plenty of other options to explore before having to go to the furthest extreme. Bankruptcy should be considered the final straw, as it is the absolutely worse thing a person can do to affect their credit history.
Effects of Bankruptcy
However, if that is the move that must be made there are some advantages. The effects bankruptcy has on your debt consolidation depends on whether you are filing for Chapter 13 or Chapter 7. If you are an individual with non-exempt property, Chapter 13 may be a better choice for you because Chapter 13 a reorganization bankruptcy where individuals can pay off their debts over a three to five year period. Chapter 7 is a liquidation process where everything of value is turned over to get out of the financial hole you may be in. It is a chance for a complete fresh start.
Debt Consolidation Helped by Bankruptcy
Chapter 13 bankruptcy can affect debt consolidation by providing the breathing room needed to catch your financial breadth. Those who opted to clean up their mistakes by filing for Chapter 13 will be given the opportunity to make up for missed mortgage payments or auto payments and if you have non-exempt property you can keep it. Non-exempt properties are such items as musical instruments for non-professionals, valuable collections or heirlooms, bank accounts, vacation homes or second vehicles.
If your debt is too evolved, then a Chapter 7 bankruptcy can further help in your debt consolidation. All assets of value must be turned over, but in return the person gets a completely “tabula Rasa.” All debts are discharged and the individual gets to start from scratch.
Before filing for any type of bankruptcy, try to focus your efforts solely on debt consolidation. Contact a financial professional for advice, perhaps their perspective can shed some light on your dim situation.