Are you drowning in debt? Or perhaps need a few suggestions regarding the most effective ways to get yourself out of debt? Part of the process may require filing bankruptcy, such as chapter 7. This will allow you to get your debt under control while you figure out how to handle your finances moving forward. Knowing what chapter 7 entails, and ways to conquer that mountain of debt, can help get you back on the right track.
What is chapter 7?
chapter 7 is a bankruptcy proceeding where a bankruptcy trustee gathers, then sells, the debtor’s nonexempt assets. Proceeds from these sales ultimately go towards paying off creditors. Investors who take the least amount of risk are often paid first, followed by unsecured creditors. Any investors involved are traditionally paid off last. The goal of chapter 7, or any type of bankruptcy, is to free oneself from debts in order to start fresh. It’s important to remember that while most people or organizations file for chapter 7, some types of debts cannot be discharged. In addition, bankruptcy discharges don’t get rid of a lien on a property.
How do I Conquer Debt?
There are many ways to conquer debt, some of which are quite simple and straightforward. In some instances you can start to reduce your debt immediately. If you’ve filed for chapter 7 bankruptcy, you will generally receive plenty of assistance in paying off your debts. However, it’s never too late to learn vital do-it-yourself methods for getting out of debt and handling your own finances afterwards. Some helpful ways to conquer debt include:
Create a budget. Establishing a budget gives you a clear idea of what your monthly income and expenses involve, and how much you can afford to spend per month. Once you’ve written down your income and expenses, establish categories for monthly spending such as groceries, travel, health, and utilities. After completing your chart, spreadsheet, or other form of documentation, it’s time to closely examine your budget and determine areas where you can cut costs.
Pay off your biggest debts first. It may be tempting to pay off your smallest piles of debt first, but you’ll do yourself the biggest favor by paying off the most expensive debt first. This is particularly true for credit cards, where you can often sort the interest rates from highest to lowest. Start by paying off your debt on the credit card with the highest interest rate first. Once this credit card debt is gone, you can focus on paying off your lower interest cards.
Organize your debt: Organization is key to helping you determine effectively pay off your outstanding debts in the most effective manner. There are generally two approaches to take, the first of which involves listing debts in order from smaller to largest without paying any attention to interest rates. You may find it encouraging to start from the smallest numbers and work your way up. Another method is laddering, or listing your debts from highest to lowest interest rates. Using this method will enable you to save the greatest amount of money in interest over time.
If you’re searching for a fresh financial start, filing for chapter 7 can be the best solution. Taking the plunge and filing for bankruptcy can ultimately help you improve your credit score and keep possessions that matter most, such as your house and car. Aside from eliminating debts you can’t pay off, you can use this time to conquer debt and stay debt-free in the future.