When you have too many bills and not enough money to pay them, you may find yourself stacked up against mounting late fees and rising interest rates. All of these extra fees make it even harder to dig yourself out of a hole. You consider negotiating with creditors but realize soon enough that without an idea of how much it is all going to cost, you do not have a solid plan.
Bankruptcy may be a solution worth considering. You may hesitate to believe that this court proceeding will force you to get rid of everything and start over from scratch. However, this is not true. Whether you file under Chapter 7 or Chapter 13, find out what happens to your assets and how you can still hold on to some of the things necessary for living.
When most people think bankruptcy, they think Chapter 7. Under this type of filing, the court appoints a trustee who goes through your debts and assets. Then, the trustee meets with creditors and comes up with a way to get them the most money. The stigma attached to Chapter 7 is that you have to sell off everything you own. This is simply not true. The trustee will evaluate the value of some of your secured debts, such as your home, vehicles, recreational vehicles, etc. If your payments are current on some or all of these, you do not have to include them in the bankruptcy. However, the trustee may urge you to unload anything you do not need, like boats, ATVs and RVs. You may either return these to the lienholder for credit or outright sell them if the value is there.
The trustee will encourage you to liquidate assets that you do not use or need to pay the debt. Investment property is something that is not necessary, and the trustee will want it to go towards the debt. The goal of Chapter 7 is to pay what you can, and then once the trustee is satisfied, the court will discharge any remaining debt.
Chapter 13 works differently in that the trustee creates a payment plan after speaking with creditors. The program aims at paying off as much debt as you can with a viable monthly amount. The repayment plan continues for three to five years. If you meet all of its terms, the judge discharges the remaining debt. No assets are liquidated, although you may choose to do so if you wish.