Those with growing debts can choose between Chapter 7 and Chapter 13 bankruptcy to free themselves of their financial strains. Chapter 7 is appealing because it can completely wipe the slate clean, absolving the person of all of his or her debts.
But, for those who don’t qualify for Chapter 7 bankruptcy, Chapter 13 may be a better option in the long-term. Here are the important lessons Chapter 13 bankruptcy can teach.
Choices have consequences
Chapter 13 bankruptcy works by establishing a repayment plan for the debtor to follow that typically lasts between three and five years. While this is no quick fix, it’s in your best interests to learn that few problems in life can be resolved swiftly and simply.
This bankruptcy option is a long road that will require routine court visits. But, in the end, it may keep you from making the same mistakes over again.
Money management skills
Filing for bankruptcy doesn’t necessarily mean you’re bad with money. In some cases, a development in technology could turn a brilliant business venture into a flop instantly. Similarly, many people face injury, sickness or another unforeseen event that causes their finances to plummet.
Even so, sticking to your court-ordered repayment plan will undoubtedly help you develop and follow a budget that prepares for the unexpected. Whether you need to work on building a safety net, skipping leisure expenses or another budgeting technique, Chapter 13 will give you plenty of practice.
In the end, these skills may even help you get more value from the money you earn.
It’s better to be proactive
If you’ve ever let dirty dishes or laundry pile up, you probably know that ignoring your responsibilities won’t make them go away. In fact, by putting them off, you’ll inevitably end up creating more work for yourself than if you’d done them in the first place.
This lesson can also be applied to money management. For example, instead of opening a new card to charge more credit, it’s better to build credit by paying off the debts you already owe.
If you’re already deep in debt, filing for bankruptcy protection can stop creditors from taking the wages you earn from work, repossessing your assets, suing you and more. In most situations, it’s better to take action sooner rather than later.
If you’re not sure how to filing for bankruptcy, which type your qualify or if bankruptcy is right for you, consult with a professional with experience and knowledge on the subject. A bankruptcy lawyer can answer all your questions and may even be able to help you negotiate a settlement with creditors.