Bankruptcy is a scary term with a lot of negativity attached to it. It is when you owe more than you can afford to pay. This occurs when you overspend and can’t catch up on your bills or credit card payments. In situations like this, you need to thoroughly assess your finances including stocks and bonds and any other liquid assets. Any and everything that you own should be valued to determine whether or not you will be able to pay back your debt. After totalling everything you own and can liquidate, if you can still not pay your bills you may be forced to file for bankruptcy to keep your head above water. Bankruptcy should not be used as a cure for out of control debt or spending. It will generally have a negative effect on your credit score, and depending on your career, it could affect your employment status. Having bankruptcy in your history can also make you ineligible for certain jobs.

Deciding To File

You have decided despite the negative consequences, that bankruptcy is the best option for you and your out-of-control financial status. There are a few different ways to file from bankruptcy, each accompanied by their own set of pros and cons. You may want to consult with a lawyer before deciding. The two most common types of bankruptcy are Chapter 7 and Chapter 13.

Chapter 7

Referred to as “straight bankruptcy,” chapter 7 bankruptcy liquidates ALL of your assets to pay off as much of your debt as possible. This includes cars, homes, jewelry, businesses, etc. Anything you own is up for grabs. The money is equally distributed to all of the companies that you owe such as banks and credit card providers. Within four months of filing, you will receive a notice of discharge and start fresh. If you are not willing to give up everything you own, this is probably not the best option for you.

Chapter 13

For people who have property that they want to keep, Chapter 13 bankruptcy may be a better option. Chapter 13 bankruptcy, also known as reorganization bankruptcy, gives you the opportunity to pay off your debts over a period of five years. For those who have a predictable annual income, Chapter 13 gives you a grace period to get back on your feet. After five years if the debt still isn’t repaid, the remaining balance is simply forgiven. This option allows you to work towards paying off debts while holding onto your property and possessions.


If you believe that bankruptcy could be the best solution for your financial situation, contact one of the experienced bankruptcy lawyers at Rainford Law Firm for a legal consultation. They will help you to determine which option is best for you and lay out the pros and cons of each option.