Debt sometimes amasses so high that someone could find it impossible to catch up with payments. Excessive debt could climb massively when a person deals with medical bills, lost income, a divorce, and other costly matters. Repeatedly dealing with Alabama creditors and paying minimum monthly payments on credit cards might not be a workable solution. Filing for bankruptcy could be the right choice, depending on debt-to-assets and other factors.
Exploring protections under bankruptcy
While massive debt might drive decisions to file for bankruptcy, there could be other options. Working payment plans with creditors, such as hospitals, or negotiating debt settlement deals with credit card companies might be less involved. Sometimes, creditors may be willing to negotiate.
Creditors could be unwilling to work with a debtor, and the debtor may lack income or assets to cover obligations. Bankruptcy laws provide ways for debtors to address their massive debt situation in challenging situations. Going through the bankruptcy process could give debtors a fresh start.
The bankruptcy process
Bankruptcy affords debtors a chance to work a payment plan under Chapter 13. Payment plans usually involve a three to five-year repayment process. Bankruptcy filers would present a payment plan to the court for review, and creditors have the opportunity to address the proposal. Ultimately, the court has the final say on accepting or rejecting the payment plan.
Those in severe financial trouble who pass the necessary means test could seek Chapter 7 liquidation bankruptcy protection. Chapter 7 requires no payment plan and would likely result in more discharged debt.
Whether filing for Chapter 13 or Chapter 7, debtors could work towards rebuilding their financial situation. Making specific changes may reduce the chances of running into financial troubles in the future.