Some of the most common reasons for turning to bankruptcy include divorce, medical bills and unemployment. Despite many people talking about bankruptcy as if it's a negative, it can be highly beneficial to those in need. There are two kinds you can try, including Chapter 7 or Chapter 13. With Chapter 13, you pay back what you owe over time. With Chapter 7, you have your assets liquidated and are left with no unsecured debt at the end of the process.
Despite the description of a Chapter 7 bankruptcy, filing doesn't mean you'll end up without any assets. Chapter 7 bankruptcies allow for many exemptions, so things like your primary vehicle and home may be exempt from liquidation.
You will need to qualify for this kind of bankruptcy, so you'll need to show that your income falls within the required limits. Usually, there is no problem qualifying since the people who are at a place where they want to file for bankruptcy are already struggling to make ends meet.
Bankruptcy isn't cheap, and it can cost you up to $2,500 for a Chapter 7 bankruptcy. Fortunately, this fee can be paid over time in some cases. Your attorney can help you learn more about bankruptcy and if it's the right choice for you. If you decide to go through with a bankruptcy, you may find that you have an immediate drop in your credit score, but because you'll no longer have outstanding unsecured debts, any future purchases you make can help you build that score up. Additionally, you'll be in a better position to save and spend within your means.
Source: CreditCards.com, "14 key factors when considering bankruptcy," Dana Dratch, accessed Aug. 29, 2017