It is essential to recognize that bankruptcy shouldn’t be taken lightly. It is usually the last option after attempting other debt relief options. Bankruptcy can ruin credit, limit access to loans and can result in the loss of valuable items. It could also affect future financial goals, such as purchasing a car or home, obtaining a job and getting insurance. Financial advisors recommend looking into other debt relief options before bankruptcy.

The most well-known type of bankruptcy is Chapter 7 which involves liquidating assets to pay creditors. The good news is that most people are able to keep their essential items, such as their home or expensive vehicle. There’s also a good possibility that any court action that has been initiated in relation to debts that are not paid will be halted once a person is made bankrupt.

Generally, individuals with regular incomes may choose to file for Chapter 13 which allows them to devise a plan that pays off their debts over the course of three to five years. It’s important to know that creditors cannot be able to foreclose on your home, repossess your property or garnish your wages during this period.

With a robust and customizable bankruptcy processing solution such as Best Case by Stretto, loan servicers can automate notification of bankruptcy, monitor changes to account data and improve communication with attorneys. This powerful tool scans nationwide bankruptcy databases in order to discover changes automatically and inform clients. It helps to reduce risks and prevent unnecessary operating costs.