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If you are unable to pay bills or loans on time, claiming bankruptcy isn’t your only option for debt relief. Declaring yourself insolvent can help you get back on track and keep your finances in order. Below is some important information about how bankruptcy and insolvency differ. 

Insolvency

Insolvency is a state in which an individual’s debt is larger than their assets. This applies to those who haven’t filed for bankruptcy as well as those who are in the process.

Claiming insolvency gives you the opportunity to pay back your debts by finding ways to increase your income. A few recommended methods include asking for friends or relatives for loans, picking up an extra part-time job, and avoiding unnecessary expenses each month.

Bankruptcy

Debt ReliefPeople who file bankruptcy have exhausted all of the methods for increasing their income and cannot achieve debt relief on their own. In this process, the court decides whether to eliminate the debt or assist with repayment. 

If you file Chapter 7 bankruptcy, non-exempt assets including jewelry, artwork, musical instruments, and secondary residences can be sold. Although this type of bankruptcy is effective in eliminating debts, it stays on your credit report for ten years after filing.

On the other hand, Chapter 13 bankruptcy allows you to hold onto your assets. During this process, you can repay a debt partially or entirely on a payment plan within three to five years. After the plan is completed, the debt is eliminated. 

 

Filing bankruptcy is a difficult process to get through on your own. Luckily, C. Roland Krueger Attorney and Counselor at Law in Lexington, NC, is ready to assist you. With 38 years of experience in debt relief and asset protection, this bankruptcy attorney is dedicated to helping you achieve a favorable resolution. Visit his website for more information about his areas of practice, or call (336) 248-8464 to speak about your case today.

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