When it comes to managing debt and finances, it can seem overwhelming. That’s why it is important to understand what options are available when facing difficult financial situations. While bankruptcy may be an option in some cases, there are other alternatives that should be explored first. Do not just to conclusions or make uninformed decisions just because you feel desperate and the pressure of mounting debt. There are options for consumers.
Consider Debt Consolidation
Debt consolidation is one such alternative. This involves rolling all of your debts into a single monthly payment with more favorable terms and lower interest rates. This could help make paying off debt manageable and even save you money in the long run.
Consider Credit Counseling and Budgeting Services
Another option for those looking for relief from their debts is credit counseling or budgeting services. These agencies work with creditors to create repayment plans that make sense for both parties and keep payments affordable for the consumer. Credit counselors can also provide advice and help people create a budget to get out of debt.
Consider Selling Assets
If you have been impacted by the recession, or heading for a foreclosure, due to a combination of debt and job loss, you may have assets that if sold could pay down some of or all of your debt. The biggest asset may be the one you are living in. There are several major factors to consider before doing this. Obviously, if your house payment is part of the problem, you may already be in foreclosure. You can read more about your what we have to say about foreclosure here. If your house is paid off, perhaps it was inherited, you may be able to sell the property and use the proceeds to pay down your debt and avoid further negative actions and consequences. If you have a lot of equity in your home, meaning that you either paid down your mortgage considerably or the value of your property is much higher than when you bought the home, selling your home could also be an advantage as long as you have somewhere to live while getting back on your financial feet.
A last resort when dealing with massive debt is bankruptcy. There are two basic types of bankruptcy filings. One is chapter 7 and the other is chapter 13. On the surface, they seem similar:
- Both are subject to federal regulations.
- Both mandate financial education for debtors.
- Both offer the chance to pay off debt.
However, there are major differences. The quickest and easiest type of personal bankruptcy is Chapter 7. Chapter 7 bankruptcy is, unsurprisingly, the most common kind of bankruptcy.
If you follow the court’s guidelines and follow federal bankruptcy regulations, your case should be resolved if you file for Chapter 7 in Pennsylvania in four to six months. When you file for bankruptcy under Chapter 7, you want to get what’s known as a “discharge,” which signifies that the bankruptcy court has absolved you of responsibility for “dischargeable debts.” In other words, you are released from the duty to pay off dischargeable obligations by a bankruptcy discharge.
Which debts are actually dischargeable? Fortunately, Chapter 7 allows for the discharge of the majority of obligations, including business debt, credit card debt, personal loans, and medical debt. Under federal law, some debts are nondischargeable, which means they cannot be discharged through bankruptcy. Alimony, child support, and, typically, tax bills and college loans are a few examples of Chapter 7 non-dischargeable debts.
A court-appointed bankruptcy trustee may sell particular possessions in a Chapter 7 “liquidation” in order to satisfy your creditors. But don’t worry; most persons who file for Chapter 7 bankruptcy are able to preserve most or even all of their possessions, either because they were protected by bankruptcy exemptions or because the trustee found it impractical to sell them.
Chapter 13 bankruptcy is a type of consumer bankruptcy that allows debtors to create and follow an affordable repayment plan for some or all of their debt. It gives individuals the opportunity to keep important assets, including their homes, vehicles, and other property. Under this type of bankruptcy, filers must show they have a steady income and will be able to repay a portion of their debt, as determined by the court. All debts which are covered under the plan must be paid in full over the course of three to five years, although some plans may take up to seven years if necessary. In exchange for adhering to these repayment requirements, filers will receive protection from creditors and collection attempts while in the repayment plan. The goal of Chapter 13 bankruptcy is to give individuals and families a second chance at financial freedom, while allowing them to maintain important assets. Ultimately, it can be a powerful tool for getting out from under unmanageable debt.
Chapter 13 bankruptcy or Chapter 7 bankruptcy is not for everyone; any decision to file should be made after careful consideration and consultation with a qualified financial advisor or bankruptcy attorney. Before filing, debtors must understand the process, the potential risks involved, and the different types of debt that can be eliminated. Ultimately, filing for bankruptcy is a major financial decision, and debtors should understand all aspects of the process before making a commitment.
Bankruptcy Should Be The Last Resort
Filing for personal bankruptcy can have long-lasting negative impacts on an individual’s financial health, credit score, and ability to obtain future forms of financing.
One of the most significant impacts of filing for personal bankruptcy is that it can stay on an individual’s credit report for up to 10 years. This will significantly reduce their ability to secure financing from lenders, as well as limit their options for obtaining credit cards and other forms of financing. In addition, the filing can also remain visible to potential employers or property owners, which can negatively impact their ability to obtain employment or rental housing.
Furthermore, filing for personal bankruptcy can result in higher interest rates when an individual does manage to secure a loan from a lender. Creditors view bankruptcy as a sign of financial instability and are less willing to take on the risk associated with lending to someone who has previously gone through bankruptcy.
717 Homebuyers Can Help Reduce Debt And Avoid Bankruptcy or Foreclosure
If you are in financial trouble, and yet find that you are in a favorable situation with your home in terms of having a lot of equity or owning it outright, perhaps a quick cash deal would help you reduce debt and regain stability financially. Although there are a lot of misconceptions about professional home buyers, most are good businesses with helpful professionals. 717 Homebuyers can be an especially great solution if you need to sell, but your home is older, outdated, in need of expensive repairs, or other unaffordable needs such as decluttering or cleaning. 717 Homebuyers can make you a cash offer. If you accept the offer, there is no need for any repairs, cleaning, remodeling, or landscaping. Your home is purchased for cash as-is. Incredibly, there are no hidden fees or commissions, and often the deal can be finalized in a matter of days. You can learn more about us here. You can read about our reputation and how we operate to learn more. You can call us for more information and a free no-obligation cash offer today at
About Josh Eberly
A native of Lancaster County, Josh’s roots run deep in his commitment to this community. He especially enjoys helping people find solutions through real estate. Josh is a seasoned investor with experience in many sides of buying and investing in real estate. Josh enjoys reading, listening to podcasts, digital marketing, and hanging out with his family. Feel free to connect with him here.