While we all love spending time with and lavishing gifts on loved ones, it can be easy to overspend. Now that the holidays and New Year festivities are completed, many people are looking at their credit card bills and wondering how to finally get out of debt. Bankruptcy can be an effective strategy for relieving the stress associated with debt and offers a much-needed respite from creditors. Still, many details must be considered before entering the process.
How can you be sure that bankruptcy is the right decision for you – and what steps can you take to guarantee that the process goes smoothly and achieves its desired goal in 2023?
2023 Bankruptcy Overview
Before we discuss the appropriate conditions for filing for bankruptcy, we should first undertake a quick review of what bankruptcy is and what it means to you.
Bankruptcy is the legal process established to allow individuals or companies experiencing crippling debt obligations to restructure their finances to pay off creditors. Standard types of bankruptcies include Chapter 7 and Chapter 13, which both involve selling assets to repay debts and can help individuals to eliminate or reduce most debt obligations.
Benefits of Filing for Bankruptcy
Individuals filing for bankruptcy in 2023 may avail themselves of three primary benefits.
- Putting an end to creditor harassment
- Avoiding wage garnishment or levies on their bank account
- Preventing foreclosure proceedings
Bankruptcy can also help individuals get back on the road to financial freedom and offers a fresh start by developing a manageable plan for paying off creditors over months or years. Filing for bankruptcy may also prevent creditors from raising the interest rate on existing debt or charging excessive late fees on payments that are overdue.
How to Prepare for a 2023 Bankruptcy
Individuals may not realize the importance of preparing financially for a bankruptcy filing, but having the correct information can optimize your chances of achieving your goals. Preparation for bankruptcy includes collecting all documents considered relevant to your financial situation – such as expense reports, income statements, credit card statements, tax returns, loan agreements, and mortgage documents. Individuals should also draft an accurate budget that documents all of their income sources and outgoing expenses.
It is also essential to research the various types of bankruptcies in order to make an educated decision regarding the appropriate course of action given the specific situation.
What Types of Debt Can Be Discharged?
Unfortunately, not all debt is dischargeable under the bankruptcy code. Categories of debt considered “non-dischargeable” include:
- Most student loan debt
- Child support payments, unless a separate agreement is made
- Alimony payments, unless an agreement is made between parties
- Most tax bills
Should You File for Bankruptcy in 2023?
Most people don’t look forward to filing for bankruptcy and may even consider it to be something to avoid at all costs. However, it can be an effective and appropriate option if an individual is struggling with overwhelming debt and does not have other options. Not addressing the debt issue can destroy your credit score and borrowing power in the future, so it is vital to face the problem and find a resolution. Although filing for bankruptcy is not risk-free – the process can also adversely impact credit scores and the ability to get a loan – it provides a solution and a pathway to recovery.
Therefore despite some drawbacks, the benefits of bankruptcy are compelling. Whether you hope to stop harassment from creditors, eliminate debt, or rebuild financially, a Sarasota bankruptcy attorney can provide the knowledge, guidance, and expertise you need.
Richard V. Ellis is a Sarasota family law and bankruptcy attorney with decades of experience helping families and companies recover from debt.