What do Kim Basinger, Walt Disney and Mike Tyson have in common? You’re not sure? What about Detroit and San Bernardino? It may be surprising, but at some point in their history each of these people and places found themselves in a bad financial situation and decided to declare bankruptcy. If you’re considering bankruptcy, you probably have a few (or many!) questions about exactly what it is, what it can do for you and how it will work. In our ongoing bankruptcy series, we’ll address each of these issues so you can make informed decisions about your financial future.
Bankruptcy is governed by a set of federal laws and is intended to help individuals and businesses make a new financial start after becoming overwhelmed with debt. Many people end up in bankruptcy after a traumatic life event such as job loss, medical bills or even divorce. Bankruptcy is never easy for anyone, but it can restore your financial health and help you move forward.
As you consider your options, you should know there are different types of bankruptcy, and your lawyer can help you determine which one fits your situation best. Individuals usually file either Chapter 7 or 13 bankruptcy with most people meeting the requirements for Chapter 7. In our bankruptcy series, we explore more in depth exactly what each type of bankruptcy does, but the goal of a Chapter 7 bankruptcy is to get your finances back on track by removing as much of your debt as possible.
It’s important to remember that while some of the benefits of bankruptcy go into effect immediately, the entire process itself won’t happen overnight. A simple bankruptcy can sometimes be over in as few as three months, but you can expect a more complicated case to take longer. Even after you have completed your bankruptcy, some types of debt are never (like child support) or seldom (like spousal support and federal taxes) removed. Regardless, you will be in a much better place financially and on the road to making better financial decisions in the future!
There are government resources that can help you learn more about these topics, but because bankruptcy can be complicated and overwhelming, it’s usually best to consult a lawyer for help. If you have additional questions, please take a look at our FAQ!
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photo credit: FelipeIbazeta (Own work) [CC-BY-SA-3.0], via Wikimedia Commons
