Chapter 13 and chapter 7 are the two most common types of bankruptcy. If you know how they work, you have an adequate understanding of how bankruptcy can give you a way out.
Chapter 7 involves the bank selling your nonexempt assets to pay off your debt, but the sale depends on whether the assets are deemed worthy. The silver lining is that it lets you keep ownership of exempt property including your house, furniture, and retirement fund.
Chapter 13, known as debt adjustment, serves as a consolidation loan and usually allows the declarer to keep ownership of all the property, provided that they pay off the debt over a predetermined period. The repayment plan should be followed by the debtor to make the mortgage payments and get out of debt.
Bankruptcy is a much saner option as compared to burying your head in the sand and not doing anything about your financial situation. Bankruptcy rates were high during the recession period of 2008 and people who were unable to pay their bills and afford their expenses had to face judgment. Bankruptcy is a way out, and it’s the most sensible thing to do when you can no longer pay your bills and are buried in debt. It gives you a chance to start all over again.
Declaring bankruptcy isn’t an absurd notion. It’s actually the logical thing to do, and there’s no shame in declaring it. Some people make it out to be a disgraceful act, which it simply isn’t. Toronto bankruptcy filings are going up, and while that’s not a good sign, it simply means that more people are inclining towards listening to the voice of reason and fixing their financial situation.
Many people feel shame and disgrace are involved in declaring bankruptcy. Often, they take it as an insult when someone suggests it’s the right thing to do, even if that someone is a financial advisor who knows that bankruptcy is the last resort and in most cases, it’s unavoidable.
The fact is that there isn’t a better alternative to bankruptcy. What step will you take if you’re buried in credit card and mortgage debt, car loans, and personal borrowings but can’t pay off any of these because you’re out of money and are simply not making enough?
In fact, the alternative to bankruptcy is much worse and even more disgraceful. Worst case scenario is that your creditors will keep suing you and win the legal authority to garnish your wages and strip you of most of your assets. At least, filing for bankruptcy gives you some control over your financial situation and saves you from the wrath of your creditors.
Bankruptcy is the legal route, and it’s the morally right step to take to tell the creditors that you won’t be able to pay them. Bankruptcy is like reaching for a life jacket when you’re going overboard.
To conclude, surviving in today’s dog-eat-dog world is tough and you shouldn’t be ashamed of doing so by declaring bankruptcy.