Bankruptcy is not always a bad option when it comes to getting yourself out of debt. Though many believe it should be the last-ditch effort, it does have its place in the financial world as a kind of relief for those who are in over their heads with debt.
While there are many kinds of bankruptcy that you can choose, one that is most commonly discussed is Chapter 7. Chapter 7 bankruptcy, also known as liquidation bankruptcy, requires individuals to part with many of their assets in exchange for the forgiveness of debts.
The good news about Chapter 7 bankruptcy is that it often comes with exceptions and allowances, so you don't have to start over from scratch. For instance, you may be able to keep your home or your primary vehicle and still complete the bankruptcy.
If you do decide to use Chapter 7 bankruptcy to resolve your debts, remember that it may stay on your credit report up to 10 years. If you file the similar, but not identical, form of bankruptcy, Chapter 13, it stays on your record for only 7 years.
No matter what kind of bankruptcy you choose, your credit score will likely drop, and you may have challenges when trying to get credit or to obtain loans for a period of time. Fortunately, even with a bankruptcy on your record, you can begin to fix your credit as soon as your bankruptcy is finalized. You'll be in a better financial position and be able to move forward without crushing debts holding you back.