Bankruptcy is undoubtedly a significant life change that can leave you with creditors baying for your blood and emotional impact. Fortunately, you can file for bankruptcy to declare your inability to pay the debts you owe and wade off debt collectors. But with effects such as dented credit score, difficulty in accessing credit, and troubled job prospects, you should understand the different types of bankruptcy when filing. The types include Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15. Understanding them comes with the following benefits.
1. Informed Decision Making
First, understanding the different types of bankruptcy will help you make informed decisions. For instance, Chapter 7, being a liquidation one, will be ideal if you are ready to sell your asset to pay off creditors. Chapter 11 will be ideal if you run a business and want to reorganize the debts and continue operating as you pay. Whereas Chapter 13 will give you an individual repayment plan according to your financial situation. Hiring a specialist like a Dallas bankruptcy lawyer would be best to help you with the process. They will use their expertise to review your situation and offer the best advice.
2. Tailored Debt Relief
Each bankruptcy chapter offers unique benefits and protection; thus, understanding them will help you get tailored debt relief. The type you will settle for will depend on your financial circumstance. With it, you will get reduced monthly payments after consolidating the loans, giving you financial flexibility. In addition, you will find it easier to run your business and improve your financial health. Note that this benefit will come from consulting the mentioned professionals and relevant ones like financial advisors.
3. Errors-Free Process
The process of filing for bankruptcy is complicated due to the different channels and laws. Unfortunately, the complexity can lead to costly errors like failure to file debts. You might also omit some assets and need to follow the rules, leading to the dismissal of your bankruptcy application. Understanding the different bankruptcy Chapters will simplify the process for you, making it error-free, especially if you engage professionals.
4. Protection from Creditors
Bankruptcy laws protect you from creditors’ harassment. However, you will only know more about this if you understand the different Chapters and rights that come with them. For instance, Chapter 7 has an automatic stay which goes into effect once you fill for bankruptcy. These laws prohibit creditors from collecting debt by selling property or garnishing wages.
5. Long-Term Financial Planning
Understanding the different Chapters will offer you long-term financial planning. This is because a professional like a Dallas bankruptcy lawyer who can help you with the process will walk you through the effects on your credit score and how to boost it. They can also help you create a budget and a favorable debt repayment plan. These professionals can also protect your asset.
Bankruptcy disrupts your life in many different ways. You can file for bankruptcy to protect you and your assets from creditors. But to do so, you must understand the different bankruptcy Chapters and what they entail. Doing so will benefit you in the ways you have read here.
