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Understanding when it is a good time to file for bankruptcy

Dealing with debt is anything but easy. Even in small forms can be detrimental for residents in California and elsewhere. However, before seeking debt relief, an individual should take the time to fully assess their situation and whether or not it is the right time for them to file for bankruptcy. While bankruptcy might be the ultimate answer to their debt problems, debtors should take the time to fully understand the process and how it could impact their current and future financial situation.

The two most common types of personal bankruptcy include Chapter 13 and Chapter 7. With regards to a Chapter 7 filing, this is used to eliminate debt. A filer does not have to pay certain debts that they owe. However, the bankruptcy filing will remain on the filer's credit report for 10 years. On the other hand, a Chapter 13 is a way to develop a repayment plan. A filer is responsible for only paying a portion of their debt over a certain period of time, usually five years. A chapter 13 filing remains on a filer's credit report for seven years.

There are pluses and minuses for any decision a person makes; therefore, it is important to consider certain factors prior to filing for bankruptcy. The first thing to consider is the impact it will have on your credit history. A bankruptcy filing will impact it regardless; however, if it impacts your ability to rent an apartment, obtain utilities, maintain car insurance or seek employment, this could significantly impact your life.

Thus, before filing for bankruptcy, it is important to obtain a copy of your credit report. This can give you a full picture of your financial situation. Additionally, it is important to consider what other debt relief options you have. Speaking with creditors could help to lower your interest rate and payment obligations.

No matter what you decide, it is important to understand how bankruptcy will fit in your life before actually filing. This will help protect your rights and interests, ensuring you have taking the appropriate steps to benefit the most from the bankruptcy process.

Source: Experian, "Should I File for Bankruptcy?" April 6, 2017

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