For most, bankruptcy is the best way to relieve debt

For most, bankruptcy is the most effective debt relief option.

Although much has been said in the media lately about the economy getting back on track, the reality is that many in the Orlando area are still struggling. Many people lost their job in 2008 and have yet to find new employment. The ones that have found a new job often were forced to take a position that pays significantly less than their prior employment. As a result, many in the area are struggling to pay off their credit card debts. Others have fallen behind on their mortgages and are facing foreclosure of their homes.

If you are in this situation, you may wonder how you are going to escape the seemingly hopeless circumstances. Many people try by attempting to negotiate payment plans or other arrangements with their creditors, but few are successful. As a result, many in these circumstances find that bankruptcy is the best way to go.

What can bankruptcy do for me?

Filers of bankruptcy receive many benefits and protections such as:

  • Automatic cessation of harassing phone calls and collection attempts (e.g. wage garnishments) through the automatic stay as soon as bankruptcy is filed.
  • The discharge or elimination of the obligation to repay most types of debt. Dischargeable debts include medical bills, credit cards, personal loans and most unsecured debt.
  • The restoration of utilities that were disconnected due to nonpayment.
  • The halting of pending foreclosure proceedings followed by the opportunity to catch up on the mortgage.

Although bankruptcy can help many with several kinds of debt, not all types can be discharged. Some of the things that bankruptcy cannot do are:

  • Discharge debts such as recent taxes, alimony, child support and student loans (in most cases).
  • Discharge debts incurred after you file bankruptcy.
  • Discharge secured debts, which are debts where you put up collateral as security for your repayment of the debt (e.g. mortgages and car loans). If these debts are not kept current, the creditor may lift the automatic stay and repossess the collateral. However, bankruptcy can help by allowing you to restructure the payments.

What types of bankruptcy are available?

As an individual, you typically have a choice between Chapter 7 and Chapter 13 bankruptcy. The type that would be best for you depends on your unique circumstances.

In general, Chapter 7 bankruptcy is best for those with little or no income that own little property that is not covered by a bankruptcy exemption (e.g. multiple homes). Chapter 13, on the other hand, is better for those that have a sufficient and regular income that would disqualify them from filing Chapter 7. Additionally, this type of bankruptcy is better for those wishing to restructure their mortgage payments (or secured debt) or keep property that is not exempt.

When deciding on the best way to address your crushing debt load, it is helpful to seek the assistance of an experienced bankruptcy attorney. An attorney can consider your long-term goals and recommend a debt relief option that would best protect your interests.

Keywords: bankruptcy, debt relief