Declaring bankruptcy is a way to get a fresh start if you find yourself in a crippling financial situation. While chapter 7 or 13 bankruptcy should not be taken lightly or jumped into without proper consideration, is it a proven method of getting creditors off your back so you can improve your quality of life. You would be wise to educate yourself on the two primary methods of filing bankruptcy, and should set up an action plan for handling your finances once your proceedings are finalized and you have a clean financial slate.

Chapter 7 Bankruptcy

When filing for chapter 7 bankruptcies, an individual agrees to have all of their non-exempt assets liquidated to pay as much of the total sum owed as possible. The rest of the debt is erased, though a record of the fact that you filed for bankruptcy is kept on file for seven or more years after the fact. People may lose house declare bankruptcy, but this is unlikely.

Many people decide that declaring bankruptcy via chapter 7 may be a way to get rid of their unsecured debt. If you have very few possessions that lenders would repossess for liquidation, you can file for chapter 7 bankruptcy and obtain a fresh financial state with very little loss on your part. Basically, if you have very little to lose, you stand to lose very little through chapter 7 bankruptcy.

Chapter 13 Bankruptcy

If you are in possession of assets that you do not want liquidated, chapter 13 bankruptcy can give you a fresh start without having your assets repossessed. In a chapter 13 bankruptcy, you agree to pay off debts over an agreed upon period. In exchange, you get to keep your property and the harassing debt collection tactics are put to an immediate halt.

Debtors often pay far less of the total amount owed when filing for chapter 13 bankruptcy, as much of the debt is discharged a few months after the application for chapter 13 is approved.

Financial Action Plan

Once you have wiped out your debt and gotten a fresh start, you will need to establish healthy spending habits to keep you from falling into the same financial pit again. Create and adhere to a budget that is realistic. Make sure that you are saving a pre-determined amount of money each month, so that if an emergency arises you have the funds needed to handle the situation without going into debt.