Bankruptcy – Nolo’s Free Legal Encyclopedia | Nolo

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 ordischarging qualifying debtcredit card balances, overdue utility bills, personal loans, gym memberships, and moreand giving the filer a fresh start. If youreconsidering filing for bankruptcy, youll want to learnwhat each chapter can and cannot do.

Individuals oftenfile for Chapter 7 bankruptcybecause its quick and doesnt require debtors to repay creditors. Higher-income earners who make too much for a Chapter 7 discharge canfile 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 chaptersstop harassing debt collectorsand put an end to wage garnishments, creditor lawsuits, and other collection actions.

Filing forbankruptcy will affect your credit score, but it will improve with timeand 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 isnt just for individuals with consumer debt problems. Filing can benefit asmall business owner by minimizing personal liabilityafter a company closure or by helping a small business return to profitability.

Finally, no one wants to file for bankruptcy. If youneed bankruptcy helpbut have reservations, youre not alone. Not only have employerslaid off staggering numbers of workers due to the coronavirus outbreak, but companies large and small are closing at a record paceandmany businesses will seek bankruptcy relief. But thats not as bleak as it might seem. Each fresh startincluding yoursmoves the economy one step closer toward recovery.

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Bankruptcy - Nolo's Free Legal Encyclopedia | Nolo

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