Many Minnesota consumers who are struggling with financial obligations think of bankruptcy as the option of last resort, and often for good reason. Filing for bankruptcy will damage their credit, as a Chapter 7 bankruptcy will stay on their credit reports for 10 years. Still, in some cases, bankruptcy is the correct choice for people.
When people have significantly higher debts than their assets, it often makes sense for them to file bankruptcy. If they choose Chapter 7, after their non-exempt assets are sold by the trustee and the proceeds are used to pay off creditors, most of their remaining unsecured debts will be discharged. Under Chapter 13, they will make monthly payments through a court-approved repayment plan over a period of three to five years.
People may want to first try negotiating with their creditors when they are having financial problems. If their creditors won't negotiate, bankruptcy may be their only option. Some people have medical issues or lose their jobs, causing their debts to balloon. For people in those types of situations, the financial relief provided by a bankruptcy can help them get back on their feet. People who are behind on their mortgages and in danger of foreclosure may also want to think about filing Chapter 13 bankruptcy. During the repayment plan period, any further foreclosure action is stopped. They will then have the opportunity under the plan to catch up on their mortgages so they can save their homes.
This ability to reorganize debt in order to save assets and homes makes Chapter 13 a good option for some people. As filing under this chapter can be complex, they may want to get the advice of a bankruptcy attorney who can describe the eligibility and other requirements.