How To Deal With A Personal Financial Crisis

As much as some politicians might like to deny it America has never before seen such high levels of bankruptcy or foreclosure, which are a true indication of the economic stability and financial health of any nation. More and more people are finding themselves in a position where they have no choice but to declare bankruptcy, file for debt settlement, or a foreclosure, with many of them simply having no idea what to do when they find themselves in the toughest financial situation of their entire lives.

Here’s an overview of the bankruptcy process, so that you understand exactly what's involved.

Chapter 7 vs. Chapter 13 Bankruptcy

This is usually the bigger area of confusion for people who need to declare themselves bankrupt - is Chapter 7 better than Chapter 13 or vice versa? When you file for Chapter 7 bankruptcy you're basically agreeing to the seizure and sale of all of your assets, the proceeds of which will then be used to pay your debt. Filing for Chapter 13 bankruptcy means that your debt is reorganized and you're then presented with a plan for repaying your debt over a period of 5 years. Certain items can be made exempt from bankruptcy proceedings including your home, furniture, personal car and even some of your cash - there's not always a need to liquidate everything you own.

Which Type Of Bankruptcy Should You Choose?

Before you take any steps towards filing for Chapter 7 or Chapter 13 bankruptcy you should first seek professional help from a bankruptcy lawyer, your personal accountant, or another professional - any cost involved is more than worth it in terms of protecting yourself from further loss. Once you've engaged the services of a lawyer you'll then attend a consultation with them, where you can mutually decide which type of bankruptcy will work best in your own circumstance. It's worth remembering that there is no one-size-fits-all solution when it comes to declaring yourself as being insolvent. After the initial consultation all that is usually required of you is to turn up at the creditor meeting and answer the questions presented to you, this happens about 4 - 6 weeks after you file.

Is Filing For Bankruptcy Expensive?

Now you're probably wondering how you can afford to pay legal fees if you're already in serious financial trouble, right? Again there are some things you need to be aware of here before you take any action yourself. First, if you file for Chapter 7 then you're going to need to be able to pay your legal team up front, this is because you're liquidating all your assets so there will be nothing left to pay them with afterwards. When you file for Chapter 13 this means attorney fees can be worked into your debt settlement and repayment plan, and so can be spread over the 5-year repayment timeline instead.

Start Spending Responsibly

Your spending habits and lack of financial acumen is probably what has you in the position of having to file for bankruptcy, debt settlement or foreclosure in the first place and you most definitely won't be able to spend your way out of this financial hole. While your bankruptcy is being filed and dealt with you should be forming new and healthier financial habits, the same ones which will prevent you having to file for any form of bankruptcy at any other time during your life.  Talk to your lawyer or accountant and come up with a financial plan.