The bankruptcy you are eligible for depends on your asset values and income. You have to meet certain requirements to be eligible for Chapter 7 bankruptcy. If you are not eligible for that, you could still file for a Chapter 13 bankruptcy.
While you should not take either of these options lightly, they can offer many benefits to those whose debt is swallowing them. Here are some benefits of bankruptcy.
You get an automatic stay
As soon as you file for bankruptcy, you get an automatic stay. That means that creditors cannot pursue collecting your payments until the court discharges your debt or creates a payment plan.
You get relief from creditors
Because of your stay, you will get relief from the pressure of your creditors. This can be long-lasting if the courts discharge your debts.
You can address some back taxes
If the IRS is garnishing your wages, going through the bankruptcy courts could be a great way to address some of your back taxes. While the courts cannot dismiss most of them with this process, older ones may be eligible. They can discharge only income taxes that are at least three years old. The courts cannot discharge penalties and payroll taxes.
Your financial situation is the key piece that can tell you whether this is a good option for you. If you are drowning in debt and cannot see a way out, bankruptcy could be a good option. That said, make sure to explore other options as well, such as debt consolidation and settlement.