It's that time of year: The season of generosity and warmth, but also the season of spending. With the holidays just around the corner, millions of Americans will take a hit on their pocketbooks and bank accounts. Come January, it may be time to rethink your finances.
'Tis the season for debt
Credit card debt is a leading cause of consumer bankruptcy. These companies make it easy for spending to spiral out of control. Then, they hit you with sky-high interest rates that can make it impossible to get back on top.
Bankruptcy is a way to get rid of credit card debt - and many other unsecured debts - and start over with a clean slate.
What's involved in filing bankruptcy?
The bankruptcy process can be complicated, especially if you try to navigate it on your own. It involves, at a minimum:
- Getting credit counseling: During this required pre-bankruptcy step, you'll learn about how to manage your credit and look at potential non-bankruptcy solutions.
- Gathering detailed records on your income, assets and debts: You'll need to get a full picture of your finances to determine whether bankruptcy even makes sense for your situation.
- Deciding which type to pursue: There are two main types of consumer bankruptcy - Chapter 7 and Chapter 13. They have different processes, time frames and options for restructuring debt. Only certain people (whose income and assets fall below a certain threshold) can qualify for Chapter 7.
- Filing the bankruptcy petition with the correct court: As soon as you file, you'll benefit from an automatic stay, which puts a stop to creditor harassment, debt collection efforts and wage garnishment.
After you file, the process differs depending on whether you're pursuing Chapter 7 or 13. Those filing under chapter 7 can generally expect a swift resolution - within a matter of months. Chapter 13 filers will follow a repayment plan, making a consolidated monthly payment over the course of three to five years.
Wondering whether bankruptcy is right for you? The first step, as with any legal decision, is to speak with an attorney about your options.