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According to data from the U.S. Bureau of Labor Statistics, about 16.8 million individuals lost their jobs in 2022. Losing a job can have a devastating effect on your financial and emotional health. When experiencing financial anguish after a job loss, filing for bankruptcy is an option to achieve debt relief.

According to the Federal Reserve Bank of New York, Americans’ total credit card balance stood at $986 billion in the first quarter of 2023, the highest level since they began tracking in 1999. Given these statistics—and taking rising rates of inflation into account—it’s not unusual for individuals and families to suddenly be worried about meeting their credit card and other debt obligations.

Bankruptcy can be a frightening word. Many people equate it with losing everything and never being able to get credit again to buy a car or home. For the most part, those fears are unfounded.

The word “bankruptcy” can send chills down people’s spines, with thoughts of losing everything and permanent financial ruin. When it comes to bankruptcy, there are many misconceptions about the process.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $2 trillion in federal funds to help Americans through the pandemic when the country faced lockdowns, and people’s income paused.

Although most people are familiar with the basics of what filing for bankruptcy means, they may not adequately understand the difference between chapter 7 bankruptcy and chapter 13 bankruptcy. According to the US Bankruptcy Court, there were 2,378 chapter 7 filings and 1,382 chapter 13 filings in the Northern District of California in 2022, which includes those living in the Bay Area.

Nobody looks forward to the day when they have to file for bankruptcy, but in most cases, this will be the best decision to help get your finances back in order. Recently, the amount of bankruptcies in California has actually dropped with the number of filings in the Northern District steadily declining over the last five years, from a high of 8,656 in 2018 to 3,902 in 2022, according to the US Bankruptcy Court.

Statistics show that people filing for bankruptcy protection in California file for chapter 7 bankruptcy 80 percent of the time and for Chapter 13 bankruptcy 20 percent of the time. There are major differences in both types of filings, and determining which bankruptcy to file depends on specific circumstances, such as having a spouse.

According to the American Bankruptcy Institute (ABI), bankruptcy filings in January of 2023 were up by 19 percent nationwide over 2022. Chapter 7 filings were up from 15,177 to 16,606, and Chapter 13 filings were up from 10,741 to 14,105.

Bankruptcy, of course, is a frightening concept to most people. It seems like an admission of failure or even a scar on your personal integrity, but it can have many benefits.