It is essential to recognize that bankruptcy should not be viewed lightly. It is usually the last resort option after having tried other options to reduce debt. Bankruptcy can sabotage credit, impede access to loans, and result in the loss or valuable items. It can also impact the future financial goals of the person, like buying a car or home, getting an insurance or job. Financial advisors suggest exploring alternative debt relief options before contemplating bankruptcy.

The most commonly used type of bankruptcy is Chapter 7 which involves liquidating assets to pay creditors. The good news is that a majority of people are able to keep some essential items such as their home and expensive vehicles. There’s also a good chance that any court proceeding that’s been filed in connection to unpaid debts will be halted when the person is declared bankrupt.

Generally, individuals with regular income can make an application for Chapter 13 which allows them to design an agreement to pay off their debts over the course of three to five years. The best part is that it impedes creditors from trying to foreclose, seize or garnish wages during this time.

The loan servicers who utilize a flexible and comprehensive bankruptcy processing software such as Best Case by Stretto can automate bankruptcy notifications, track changes in account data and enhance communication with attorneys. This powerful tool searches nationwide bankruptcy databases to detect changes automatically and inform clients. It helps reduce the risk of bankruptcy and eliminate unnecessary operating expenses.

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