ABSOLUTELY. The days of bankruptcy drawing scorn and ridicule are over. Individuals and small companies in the hundreds of thousands have turned to bankruptcy in the last decade to discharge and manage debt. Your friends will actually talk to you after you’ve filed.
As leading Republican Presidential candidate Donald Trump recently said: “I used bankruptcy as a tool, just like every other wealthy person I deal with. Now I’m one of the wealthiest people in the world.” Filing for bankruptcy, of course, does not mean you’ll be the next Donald Trump. But it normally does improve your situation substantially.
That said, bankruptcy does have some myths, however, and knowing the details is essential to playing your bankruptcy cards right. Rarely does bankruptcy allow you to discharge all of your debts, and filing for bankruptcy never causes you to lose everything. The truth lies somewhere in the middle, depending on the amount of your income, the amount of your debts and the kind of debts you have.
Bankruptcy comes in two basic types: Chapter 7, which is “Straight Bankruptcy,” and Chapter 13, which is a “Reorganization.” In a 7, the trustee liquidates all your non-exempt assets, pays the creditors from the proceeds (even if it’s $500), and discharges the remaining debt. Chapter 13 results in a 3-5 repayment plan, in an amount you can afford.
Knowing the differences and what fits your situation is crucial, of course, as is knowing what debts can never be discharged. Yes, some debts literally will follow you to the grave unless a compromise is reached or the debt is paid in full. You do want to know which debts these are before filing.
Thus, today’s featured article provides important insights on how to use one of the effective debt management tools in the arsenal of an individual or small business.