When you are struggling with mounting debt, you might be afraid to file for bankruptcy because you might be afraid to part with certain possessions that you have put so much time and money into. For example, when times were better, you might have owned a boat and you might have spent a lot of time maintaining the boat. Therefore, you might be making the "sunk cost" fallacy when you try to hold onto your boat when you can no longer afford it.
Your Consultation with a Bankruptcy Lawyer
A bankruptcy lawyer will help you understand what your financial options are so that you can determine:
- Whether you should file for bankruptcy
- Whether to file for Chapter 7 or Chapter 13
- Whether you should keep an asset, such as a boat
In some cases, filing for bankruptcy might not make sense and you may be better off selling some of your possessions that you don't need to avoid bankruptcy. That way, you will not have the fact that you filed for bankruptcy on your credit report and this can assist you when obtaining credit in the future.
Chapter 13 Bankruptcy
In other cases, it might make more sense to file for Chapter 13. Under these circumstances, you will be able to keep your assets and you will need to use your income to pay off your debts over an extended period of time.
Chapter 7 Bankruptcy
However, if you are not bringing in an income, you may be forced to file for Chapter 7 bankruptcy. Whenever you file for a particular type of bankruptcy, you might risk even having your bankruptcy converted into a different type of bankruptcy based on your ability to pay back your debts.
With Chapter 7 bankruptcy, many of your assets will be liquidated and your boat will probably not be exempt unless you still haven't paid it off or you are able to prove that you need the boat to earn an income. However, every state is different and you should discuss with your bankruptcy lawyer whether there is a way to keep your boat.
Your assets will be sold and used to pay off your creditors. Then, the remaining debts that you have will be discharged and you will be able to have a fresh start. However, after you have filed for bankruptcy, you will no longer have to deal with harassing creditors, you will have an easier time getting a loan, and you will never have to pay the debts that you discharged after completing your Chapter 7 bankruptcy.
For more information, reach out to a bankruptcy attorney.