Filing bankruptcy has meant personal failure for many people in the past. Some people feel ashamed when they run out of options for paying their debt. Many others never even consider filing bankruptcy because they assume they wouldn't qualify for one reason or another. It's a personal decision, but it should also be considered a business decision. Everyone wants to be able to pay their bills, but there are times when filing for bankruptcy is the best way to get back on track.
When people lose their jobs and have to choose between buying groceries and paying the credit cards, most choose the groceries. Many people feel the system is setup to make them fail. After all, once a credit card payment is late, more fees are added to the balance, and next month the minimum payment may be double the amount of the previous bill. People in debt often shake their head wondering how the bank expects them to pay more this month when they couldn't afford the minimum payment last month. When missed payments start to accumulate, the next step is usually a debt collector. Making matters even worse, once creditors reports a late payment to the credit bureau; other creditors may start slashing available credit with little or no advance warning. It doesn't take long to become trapped in debtor limbo where the debtor can't afford to pay any bills. Filing bankruptcy is often the last resort for people in severe debt.
Filing for bankruptcy can be a complicated and scary endeavor. Many attorneys offer free consultation for bankruptcy clients, and this can be a great experience in the sense that the potential client learns how the process works, what paperwork is required, and what type of bankruptcy they may qualify to file. Many times the fear of filing bankruptcy has a lot to do with not knowing much about it.
The type of bankruptcy will depend upon the income level and expenses of the debtor. Most people are able to file for Chapter 7 Bankruptcy, which means the debt is discharged and the case is closed usually within ninety days or so. Chapter 13 Bankruptcy is for those who do not qualify for Chapter 7 because they make too much money and can afford to pay some money to creditors. This type of bankruptcy is more complicated and requires partial payback of the debt, though it's usually a small percentage.
Filing for bankruptcy does not have to be the end of the world. The hardest decision is often just the decision to explorer the possibility of filing.