Everything You Need to Learn about Bankruptcy and its Alternatives

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A lot of Americans are in difficult financial distress and considering bankruptcy. Did you know even superstars have gone broke and some have filed bankruptcy?

It’s possible that you’re among the millions of US citizens that are in a quagmire on how to pay their monthly bills. Everyone wants to meet up with financial obligations, but not everyone can.

However, irrespective of your financial predicament, you should have in mind that you’re not alone in this. If you can make enough research, there are options out there to help reduce your financial burden. Since you want some financial relief, it’s imperative that you take some time to acquaint yourself with the available options, what those options cost, and their pros and cons.

If you read this article to the end, here are some things you’ll learn:

  1. Know more about bankruptcy
  2. Identify the bankruptcy alternatives that you have
  3. Understand the available resources such as a) Bankruptcy Qualification Estimator b) Bankruptcy Decisioning Portal
  4. What’s the next step to take?

What is Bankruptcy?

In the most basic definition, bankruptcy can be defined as a legal relief from debts. Examples of debts that bankruptcy provides relief from include medical bills. Credit cards, payday loans. Personal loans etc. Basically, they only provide relief from unsecured loans.

Before you’re issued a chapter 13 bankruptcy, your expenses and income are first evaluated to ascertain your capacity to make up with a debt payment plan. For chapter 7 bankruptcy, the criteria are different as they’ll check your capacity not to make requisite payments.

What’s the cost and fees of filing for a bankruptcy discharge?

You may be wondering about what it’ll cost of bankruptcy? A good majority of bankruptcy attorneys recognize this and they’ve set up some payment plans that can help people to afford their bankruptcy payments.

Most of the costs you’ll be required to pay include the filing fee and the attorney fee. The attorney fee varies with a wide range of factors while the filing fee is often between $300 and $400.

Especially since the reason why you’re filing for the discharge in the first place is that you can’t pay your bills.

How Many Types of Bankruptcy are There?

There are numerous types of bankruptcy, but the most prominent of them are Chapter 7, Chapter 11, and Chapter 13 bankruptcy. There is also the Chapter 9 and 15 bankruptcy, but these are much less prominent than others. There’s a Chapter 12 bankruptcy for commercial farmers and those in the fishing business.

How Bankruptcy Works

You may want to understand the pros and cons of bankruptcy before deciding to file. Chances are high that you’ll be applying for either a Chapter 7 or a Chapter 13 bankruptcy. Why? Because these are the two most prominent types of bankruptcy in the U.S.

Each of these bankruptcy types has its special characteristics. Some of which include the following:

Chapter 7 Bankruptcy is:

1. Very fast. a debtor is discharged off its loan in less than 90 days

2. It is not expensive

3. Chances are high that debtors may lose some or all of their assets, however, there are exemptions to the rule. These exemptions can prevent you from losing your house, RVsm boats, cars, etc.

4. Debtors must qualify based on household size, state of residence, and income level.

5. It must be on your Credit Report for a 10 year period

Chapter 13 Bankruptcy is:

1. The timeframe for getting a Chapter 13 bankruptcy is much slower as the discharge is often between 3 years or 5 years.

2. It can be very expensive

3. You are at liberty to keep assets

4. You have a monthly payment plan

5. There are no criteria for qualification provided that your debt is within the regulated limits

6. The details will be on your Credit Report for a 7 year period

A good number of people will have to first estimate whether they qualify for the debt relief or not, then they’ll consult with a bankruptcy attorney for free, take an online consultation, attend meetings, take another online course, get a bankruptcy debt discharge.

Alternatives to Bankruptcy

Just like any other debt relief method, there are alternatives to filing for a bankruptcy discharge. I’ll take a deep dive into these alternatives later in the article, but first, let’s talk about a free tool that lets people analyze whether they can get a bankruptcy discharge or not. The free tool is designed by Ascend as its free bankruptcy decision portal. On this portal are calculators showing you the cost of applying for a bankruptcy discharge based on your zip code. It’ll also consider the pros and cons of each debt relief option and suggest which one is best for your finances.

As mentioned earlier, it’s imperative that you’re acquainted with your options, the pros and cons of those options, and the costs of applying for those options. This way, you can make the most valuable decisions.

Let’s talk about the bankruptcy alternatives; we’ll start from the least extreme ones:

Explain your financial predicament to creditors 

If you have a similar perspective to issues like I do, you wouldn’t prefer an alternative that doesn’t hurt your credit score. You may have canceled this out of your option already. If you have, then make a switch to the next option on the list:

Quite often, creditors would rather have you sticking with your former payment plan, so they can get as many interests and payments as possible for you. Thus, it can be helpful to contact your creditors for help.

Debt Payoff Planning

Your debt payoff strategy should be one that aligns with your budget. Your debt payoff strategy should help to arrange your debt with snowball, avalanche, or savvy debt payoff method; this will help you eradicate your debt gradually.

Debt Settlement

Debt settlement companies are those companies set up to help debtors negotiate for a reduction in debt amount. This helps debtors to save more money than they’ll have done with a debt management strategy. This option has its cons and pros, so you should make well-detailed research.