Can bankruptcy give me peace of mind?
Recently on a forum we had a debtor ask, "Can bankruptcy give me peace of mind?" This is a tough, rather philosophical question, but in this article we'll try to address what bankruptcy can and cannot give you.
First, before considering bankruptcy, it is important to determine what you hope to accomplish. For instance, if you are drowning in thousands of dollars of debts due to a medical crisis, a job loss, a death or any other type of crisis bankruptcy is a legal means to potentially discharge unsecured debts or help you restructure debts over a period of time and repay your debtors.
Who may benefit from bankruptcy?
So who actually benefits from bankruptcy? Unfortunately, with high unemployment and skyrocketing medical costs it's not unusual for some individuals to face debt which is simply overwhelming. For instance, if you lost your job and found out you had a debilitating disease but you had no medical insurance, it's possible you have accumulated hundreds of thousands of dollars in medical expenses that you will never be able to repay. In this case, bankruptcy may be a solution to discharge your medical debts and allow you a fresh, financial start with greater peace of mind.
Who should not consider bankruptcy?
Bankruptcy is not, however, for the individual who simply does not know how to live within their means. We all know this guy, the person who has to buy the latest and greatest gadget without care or consideration about who will pay the monthly credit card bill. Generating debts for items which are not needed with no means to repay your debts is irresponsible and hurts all of us. Bankruptcy in this case should not be used as an easy solution to your debt crisis.
Others who will not benefit from bankruptcy are those who have debts which are not discharged. For instance, if you have federal student loans (exceptions exist), recent tax debts, penalties from driving under the influence of alcohol or drugs or child and spousal support back payments, these debts are not discharged and bankruptcy is not the right choice for you.
Should I choose Chapter 7 or Chapter 13 bankruptcy?
Gone are the days where all debtors could simply file Chapter 7 bankruptcy and discharge most of their unsecured debts. Bankruptcy regulations have been tightened, and many debtors will now find they will have to repay a portion of their debts by filing Chapter 13 bankruptcy. Talk to a bankruptcy lawyer if you have questions about what bankruptcy is right for you.
So will bankruptcy bring you peace of mind? It could, but if your actions have contributed to your financial crisis and you have not changed those actions, chances are filing bankruptcy is not the right solution for you. Instead, you will simply be in an endless cycle of spend and debt accumulation and in five years we will be having this same discussion again.
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Bankruptcy is not wrong for those who have made an honest effort to pay creditors.