There are many different situations that can occur in life that are out of your control. Sudden and unexpected medical emergencies and bills, divorce, the loss of a job, or other situations can happen that leave an individual or a couple unable to meet their financial obligations.
In these situations, and providing all legal criteria are met, bankruptcy, either Chapter 7 or 13, may be the solution to the problem. Chapter 7 bankruptcy is a liquidation of most of your assets to pay off creditors as a settlement for the debts. Chapter 13 is a repayment plan, in which you will keep many of the assets but pay them off over a period of three to five years.
Regardless of the type of bankruptcy, there will still be financial matters to consider during the process and in the years after. A financial planner can be helpful in providing education and guidance in getting back on your feet. They will also be instrumental in helping you to begin to rebuild your wealth and invest in your future.
- Budget development – While budgeting is not the reason for many people to file for bankruptcy, it can sometimes be a contributing factor. By working with a financial planner, it will be possible to develop a practical and workable budget that may provide opportunities for investing and retirement savings much sooner than you thought.
- Planning for purchases – Big purchases such as vehicles and appliances will require a credit check. After going through bankruptcy, there will be a direct hit on your credit score. A financial planner will be able to work with you to not only plan for your future but to also rebuild your credit score.
- Debt repayment plans – Not all debts are discharged in bankruptcy. Working with a financial planner can help in structuring payment plans that will pay the debts down quickly but also accommodate for your day-to-day living needs and other expenses.
- Building an emergency fund – Most financial planners will focus on working with clients to build an emergency fund. This fund will be used when situations that are unplanned for occur, but only if they are essential. This cushion helps people to make better decisions and to avoid using high-interest options such as credit cards or loans to cover these expenses.
It will be important to talk to your financial planner about your options after bankruptcy. This is a time to start fresh and make the best choices for your financial future.