Bankruptcy affects a lot more than just your credit score. Further, filing for bankruptcy does not mean you will be granted bankruptcy. There are many factors to consider before filing such a claim, such as what options are available, how your assets will be affected, if you qualify, and more. Depending on your circumstances, there could be better legal options to handle your financial hardships that will give your future a more positive outlook.

Two Types of Bankruptcy

Many consumers are not aware that there are two separate types of bankruptcy. This is important to understand because each is a unique tool that can be used for finances but one cannot replace the other. In fact, filing for the wrong type can mean being denied when you would have otherwise gotten the financial help and break you needed to get your life in order.

In a Chapter 7 bankruptcy, the filer walks away from debt completely in cases where debt is so high or an income has become so low that there is no money left after basic expenses for a payment plan. On the other hand, a Chapter 13 bankruptcy creates a payment plan to repay debts, typically over three to five years. To get a Chapter 7 bankruptcy, it must be approved, which many consumers are not aware of going into the claim.

Bankruptcy Costs Money

Many would assume that declaring bankruptcy would be free or cheap, but it can actually be quite expensive. A Chapter 7 bankruptcy typically costs between $1,500 and $2,500. A Chapter 13 bankruptcy often costs between $2,00 and $4,000. In the case of a Chapter 13 bankruptcy, this cost can be applied to the repayment plan. A Chapter 7, however, this is not an option. Typically, consultations are at no cost, so these options are still worth looking into for those under financial strife.

How Bankruptcy Works as a Tool

The two chapters of bankruptcy work as tools that can be used by those burdened by debt to get back on track. For those that were out of work but now have an income, a Chapter 13 can help them get their finances in working order. For those that are still unemployed or cannot become employed, Chapter 7 offers a new beginning. Hiring the right lawyer can help. Our team understands the nuances with different filings for bankruptcy and can help inform and guide you through the process. Contact us today to find out how our services can help.