If you are considering filing for bankruptcy, it is also important to think about life after bankruptcy. This legal process can give you a financial fresh start. But how can you take proactive steps to get the most out of it and create the financial future that you have been looking for?
One key thing to do is to create a budget, which can help prevent the need to file for bankruptcy in the future. But exactly how this works will depend on the type of bankruptcy that you filed for.
Chapter 7
With Chapter 7 bankruptcy, you liquidate assets, though there are exemptions that will allow you to keep some important property. Once the liquidation is completed, the remaining debts are forgiven. In a case like this, your new budget should focus on balancing your spending and your earnings so that you do not find yourself facing overwhelming debt again in the future. The debt you had is gone, but that only offers long-term relief if you ensure that it stays that way.
Chapter 13
With Chapter 13 bankruptcy, however, you create a repayment plan. You are essentially taking care of your debt on an extended timeframe, perhaps spending the next three to five years paying it off. In a case like that, your new budget should be focused around making your monthly payments. The court will work with you to come up with an affordable repayment plan, and you cannot miss those payments under a Chapter 13 bankruptcy filing.
No matter which option you choose or qualify for, it is crucial to understand the legal steps you can take and how to get the most out of the bankruptcy process.