You're going to file for bankruptcy. You've tried to cut back on your spending, but there's just no way to pay off what you owe. Your income doesn't fit your debt, at least not anymore.
If so, know that bankruptcy is a useful tool when you understand it and use it correctly. Below are four important things to know as you move forward.
1. You may retain some debt.
For instance, do you have student loans? Do you have to pay child support? Typically, neither one will be discharged in bankruptcy.
2. There are options.
Chapter 7 bankruptcy liquidates the assets you still own. The money goes to the creditors and most other debts are erased. Chapter 13 sets up a repayment plan, with scheduled monthly payments. Know which option you qualify for and which is best for you.
3. Not all options are for you.
The type of bankruptcy used depends on who is filing. For example, people in certain industries -- like farming -- can use Chapter 12, while companies can use Chapter 11. These are typically not used for individuals.
4. You must report everything.
Take your time. Go over the paperwork carefully. Report all of your debt and your income. Leave nothing out and show the court a clear picture of your financial situation.
These are just four important things to understand before you file for bankruptcy, and they help to show you that the process can be complicated and technical. To get back on your feet financially, make sure you know exactly how you should proceed.
Source: Dave Ramsey, "The Truth About Bankruptcy," accessed Aug. 18, 2017