Filing for bankruptcy is one of the most stressful financial events that an individual can face, and many people equate the situation with financial ruin – but what if that’s not really the case? While people obviously only file for bankruptcy when in financial straits, what happens after filing varies widely. If undertaken with the right perspective and a plan for recovery, bankruptcy can open up new opportunities and be the first step towards recovery.
The Best Of Many Options
The first thing to consider when filing for bankruptcy is whether or not it’s actually the best option available to you, or whether you might be able to tackle your existing debts via debt consolidation, credit counseling, or a debt relief program. These programs all have their pros and cons, but if you really don’t have the money to pay your debts, it’s unlikely they can help. These programs are better suited for individuals who are struggling to make their monthly payments, but just need a little added support to make ends meet.
A Chance To Rebuild
One of the biggest misunderstandings that people have about filing for bankruptcy is that it’s a barrier to achieving financial goals down the line, like buying a home or being able to get a new credit card. This is a common and understandable mistake, and one most people never have a chance to correct because they’re so ashamed to have filed for bankruptcy at all. As bankruptcy attorney Rowdy Williams notes, “Filing for bankruptcy is neither an easy solution – a get out of jail free card – nor an absolute disaster, but very often those are the only ways people understand it. In reality, though, it’s a tool like anything else. It can help you achieve your goals, but only if you use it wisely.”
One way to come to terms with what bankruptcy actually enables is to look for uplifting stories of people who used their bankruptcy filing as a way to build healthy financial practices. Faced with serious debt, bankruptcy makes it possible to reorganize your approach to spending, and, after a period of time, it will actually be erased from your credit report.
There Are Different Types Of Bankruptcy
Another reason you may find bankruptcy to be advantageous is because there are different filing formats depending on your circumstances. For those with a comparatively lower income, Chapter 7 bankruptcy allows for total liquidation; it’s fast and takes a serious toll on your assets and credit, but it’s also what most people think of when they think of bankruptcy. The alternative, Chapter 13 bankruptcy, is known as consumer bankruptcy and actually allows for some structured debt repayment. It’s a less dramatic approach, but one that can help you find your financial footing so that you can move forward and tackle bigger goals.
There’s no way to know whether you’ll come away from a bankruptcy filing in a better situation or with the same bad habits surrounding your finances, but for those who have to choose between debt collection payments and putting food on the table, it may be the only way. With proper guidance and financial education, though, you can give yourself the best chance at a positive financial future.