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September 20, 2021
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Law

Guide 101: Things to know before you file for bankruptcy

If you are in financial distress and dealing with more debt than you can repay, bankruptcy could be an option for you. Bankruptcy is a big decision, and while it can offer some relief, you must consider the pros and cons in depth. There are also aspects like the state median income, which can determine whether you qualify for Chapter 7 bankruptcy. If you are in Nevada and want advice for your situation, you can click here for help. Below are some things to know before you file for bankruptcy. 

When should you consider bankruptcy?

First and foremost, bankruptcy should not be your immediate solution. For many people, options, such as negotiations with creditors and debt consolidation, are also feasible. You may consider bankruptcy if – 

  1. You have tried to negotiate a repayment plan with creditors but with little or no success. Creditors can be aggressive, and if they do not intend to cooperate, you cannot do much. 
  2. You have too much debt. If your income and assets are unlikely to repay your existing debts, filing for bankruptcy is probably your only choice. 

What are the benefits of bankruptcy?

There are numerous benefits to bankruptcy that are hard to ignore, especially for someone in extreme debt. First and foremost, bankruptcy protects against aggressive creditors. Once you have filed for bankruptcy, your creditors cannot harass you for payments anymore. If you file for Chapter 7 bankruptcy, you can have a clean slate and discharge most of your debts. You can even retain your house and car, provided you can repay the installments. If you file for Chapter 13 bankruptcy, you have a repayment plan, and therefore, you don’t have to lose your valuable assets. For the latter, you must have a steady source of income. 

On the flip side

Do not take the impact of bankruptcy for granted. It will appear on your credit report for years, and as a result, you may not qualify for a loan or credit card unless you pay exorbitant interest rates. Bankruptcy also impacts a person’s emotional wellbeing. Losing your assets (in Chapter 7 bankruptcy) can be hard to deal with. Also, bankruptcy will impact your ability to rent a property or get a job. 

Consult a bankruptcy attorney

Instead of guessing what’s right for your financial situation, consider meeting a bankruptcy attorney. They can guide you further on the right steps.  

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