With Chapter 7 bankruptcy, it’s clear that the benefit is eliminating your debt. You do have to liquidate some non-exempt assets to do so. Creditors may get partial payments based on this liquidation process. But after that, other debts will be forgiven, and you get a fresh start.
However, you may not pass the means test for Chapter 7. Perhaps you earn too high a wage, so you don’t qualify. Instead, you qualify for Chapter 13 bankruptcy, which can be used to consolidate your debt and create a repayment plan.
The long-term benefit
This process can still be beneficial, even though your debt isn’t immediately erased. The goal is a bit different. Because you have a significant income, the court will work with you to create an affordable repayment plan. For example, they could give you a set amount of money that has to be paid every month for the next three years. Once you’ve completed that term, you have paid off the debt, and the bankruptcy case concludes.
In a long-term sense, this is still very beneficial. It eases some of the financial strain that you face. Rather than owing multiple debts at once, or having an overwhelming amount of outstanding debt that is immediately due, you get to spread it out and make it more affordable over time. This also means that you stop missing payments, which can have a negative impact on your credit score. As long as you make the payments under the bankruptcy plan, you can work to create a positive financial future.
Are you wondering which type of bankruptcy you qualify for? Take the time to carefully look into all of your legal options.