One reason that some people don’t file for bankruptcy is because they don’t want to lose their assets. They think of bankruptcy as a process of liquidating assets, paying off their creditors with the money from those sales and then having the rest of their debt forgiven. They do want to get rid of their debt, but not at the expense of assets like a home or a vehicle.
Fortunately, there are many ways in which you can declare bankruptcy so that you don’t lose your assets. For example, even when using Chapter 7 – liquidation bankruptcy – it is unlikely that you’ll lose any of your assets unless you own a lot of luxury property and other valuable non-exempt assets. You will almost certainly be able to keep your primary vehicle, your home, your tools of the trade and many other necessities.
Using Chapter 13
The next thing to keep in mind is that Chapter 7 bankruptcy is certainly not your only option. You could also use Chapter 13. With Chapter 13, you will create a repayment plan. This approach consolidates your debt so that you only make one payment monthly. Oftentimes, this reorganization of someone’s debt – and the aim of ensuring that the monthly amount due is manageable – is enough to make their financial situation manageable again.
With Chapter 13, debt is paid down over 3 to 5 years. Chapter 13 bankruptcy is often referred to as a “wage earner’s plan.” It only works for someone with a steady income. If Chapter 13 bankruptcy is a good option for you, you can take advantage of the protection afforded by the automatic stay to ward off foreclosure or repossession, if these are risks for you. You won’t risk your house or car with Chapter 13 bankruptcy because there is no risk of liquidation of non-exempt assets as there is with Chapter 7.
Considering Your Options
At the end of the day, bankruptcy can be a valuable tool, but it is a complex process. Take the time to really consider all of the options at your disposal and how they may be helpful for you before committing to one option over another.