We’ve all struggled to keep our spending under control and make ends meet at some point, even when life is going according to plan. But for many of us it just takes a broken down car, a few days off work without pay, or an unexpected medical bill to put us into serious circumstances, and it can take quite some time to recover. Each year, over one million Americans find themselves in debt that they’re unable to pay and decide to file bankruptcy. If you’re dealing with unmanageable debt, you’re not alone, but you do have options.
Some people may say, “I’m bankrupt” because they can’t pay their bills, but they are actually “insolvent.” Bankruptcy and insolvency are two different legal terms. Insolvency means you don’t have the assets available to make your debt payments on time each month. This doesn’t just mean your paychecks won’t cover your bills; your assets also include your investments and any property that could be sold to pay bills. Your state of insolvency could change from month to month, depending on your income and expenses. Just because you have a rough month or two, does not mean your only option is bankruptcy. By creating and sticking to a budget and making other changes, you may be able to get a handle on your debt and avoid bankruptcy. If possible, this is the way to go, but sometimes bankruptcy is the wisest long-term solution.
Being bankrupt is a legal state of declaring that you are insolvent and cannot pay off your debts. If you’ve done everything you can to cut your budget and work with creditors, but still can’t make a dent in your debt, it might be time to move from insolvency to bankruptcy. Bankruptcy might be the option you need to get a new financial start. The first step is to meet with me and conduct the Means Test, which will tell us which chapter of bankruptcy you should file. If you do not have much income and have significant debt, you will pass the Means Test and can file a Chapter 7, which discharges most types of debt. If you don’t pass the Means Test, you can still file a Chapter 13, which reconfigures your debt and greatly reduces your payments. You are put on a 3-5 year repayment plan, and at the end of that period, the remainder of most of your debt is discharged.
Having the weight of debt hanging over your head can really be stressful and affect many areas of your life and well-being. I’m here to guide and support you, whether through bankruptcy or revising your budget and spending. If you have questions about how to deal with your debt, give me a call. We’ll look at your situation and decide how to best move forward.