Yes, a bankruptcy can potentially give you a fresh start, but it depends on your situation and the type of bankruptcy you file for. In general, bankruptcy helps people discharge or restructure their debts, offering relief and a way to rebuild financially.
Here’s a brief rundown of how bankruptcy might help:
- Chapter 7 Bankruptcy (Liquidation): This is the most common form for individuals who don’t have much property or assets that need protection. It can discharge most unsecured debts like credit card balances, medical bills, and personal loans. Once your debts are discharged, you can start over, free from those obligations. However, it stays on your credit report for 10 years, which can affect your ability to borrow in the future.
- Chapter 13 Bankruptcy (Reorganization): If you have a steady income and some assets, Chapter 13 might be a better option. It allows you to repay your debts over a 3 to 5-year period, with the court approving a plan that reduces or re-arranges the debt. After successfully completing the plan, the remaining qualifying debts are discharged. Chapter 13 stays on your credit report for 7 years, but it might be easier to get loans after completing your repayment plan compared to Chapter 7.
The key to using bankruptcy for a fresh start is to recognize that while it can clear significant debt, it doesn’t remove all obligations, like student loans, child support, or taxes in certain cases. It also doesn’t instantly rebuild your credit; you’ll still need to practice good financial habits afterward to rebuild your score over time.
It might feel like a heavy decision, so it’s often good to speak with an experienced Utah bankruptcy attorney to weigh your specific options. Would you like to learn more about how each type works in practice?