Bankruptcy

Intro to Bankruptcy

When bills become unmanageable, such as after a divorce, illness, or job loss, bankruptcy provides a filer with a financial safety net. It works by wiping out or “discharging” qualifying debt—credit card balances, overdue utility bills, personal loans, gym memberships, and more—and giving the filer a fresh start. If you’re considering filing for bankruptcy, you’ll want to learn what each chapter can and cannot do.

Individuals often file for Chapter 7 bankruptcy because it’s quick and doesn’t require debtors to repay creditors. Higher-income earners who make too much for a Chapter 7 discharge can file for Chapter 13 bankruptcy. Although a debtor must pay back some amount through a Chapter 13 repayment plan, Chapter 13 has other benefits, like preventing a home foreclosure or car repossession and reducing the amount owed on secured debt. Both bankruptcy chapters stop harassing debt collectors and put an end to wage garnishments, creditor lawsuits, and other collection actions.

Filing for bankruptcy will affect your credit score, but it will improve with time—and often far sooner than most filers expect. In fact, many people find that filing for bankruptcy repairs credit faster than would be possible otherwise.  

Bankruptcy isn’t just for individuals with consumer debt problems. Filing can benefit a small business owner by minimizing personal liability after a company closure or helping a small business return to profitability.

Finally, no one wants to file for bankruptcy. If you need bankruptcy help but have reservations, you’re not alone. Not only have employers laid off staggering numbers of workers, but companies large and small are closing at a record pace—and many businesses will seek bankruptcy relief. But that’s not as bleak as it might seem. Each fresh start—including yours—moves the economy closer to a more stable place.

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