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Things to consider when thinking about bankruptcy

For people in Massachusetts who feel overwhelmed by their debt, bankruptcy may be an option. Making the decision to file for bankruptcy is something that shouldn't be taken lightly. It can provide financial relief to people who are in dire circumstances.

When people are considering bankruptcy, they should look at the reasons that they got into significant debt. If their debts were caused by a single event such as an illness that led to substantial medical debt, then the problem may be solvable through bankruptcy. If they instead spent years overspending and driving up their credit card debts, they will need to figure out how to fix their underlying credit behavior so that they do not get into the same situation again.

People might want to talk to credit counselors at nonprofit credit counseling agencies. It can be helpful to have a second pair of eyes when viewing the financial picture. It is up to the individual rather than the counselor to decide whether bankruptcy is the right option.

If people decide that filing bankruptcy is the best option for them, they should be aware that it will remain on their credit records for up to 10 years. There are two primary types of personal bankruptcy, including Chapter 7 and Chapter 13. Chapter 7 bankruptcy is known as a total liquidation. In this type of bankruptcy, the debtor's assets are sold to repay the creditors. There are many types of assets that are exempt from liquidation, however. Some people may be able to keep most or all of their assets in their bankruptcies. In Chapter 13, people repay a portion of their assets through a structured repayment plan over three to five years. A bankruptcy lawyer may advise clients about the available solutions to their debt problems.

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