Day-to-day management of finances may not be everyone’s cup of tea. Keeping track of expenses and cash inflow, payments, receipts and budgets can be confusing, as any Outagamie County, Wisconsin, resident may know. Dealing with high levels of debt and considering whether to file for bankruptcy can be highly daunting challenges which unfortunately need to dealt with, especially if no other options exist.

A problem with debt usually begins when little or no income is available to meet every day expenses. A person may then feel pressure to borrow repeatedly and often in escalating amounts. When income levels don’t improve over time, the person may be forced to seek a fresh financial start. However, there are different kinds of bankruptcy petitions so it is necessary to examine each case individually to see which kind would work best for a particular situation. For some, this might require a simple reorganization of debts, while other situations might require complex asset liquidation.

If a debtor earns enough income regularly to suit a modified repayment plan, the person may file for a Chapter 13 bankruptcy and seek a finite payment plan with creditors. Chapter 13 may see some debts prioritized and some forgiven. A person filing for bankruptcy is also automatically granted a stay to prevent creditors from trying to collect the debt while the petition is being heard by the court. If for any reason, the bankruptcy petition is dismissed, the stay is terminated and creditors can resume debt collection tactics.

Even when the court approves debt restructuring, payments for back income taxes or child support still need to be met. Creditors may also contest the court’s decision through an adversarial complaint, after which the repayment plan might need to be revaluated and redrafted. A debtor may undergo credit counseling or seek advice from a professional prior to filing a bankruptcy petition.

Source: United States Bankruptcy Court, “Frequently asked questions,” Accessed Oct. 24, 2014