The following article is a guest post. If interested in submitting a guest post, please read my guest posting policy and then contact me.
Chapter 7 bankruptcy is for an individual and can be a fresh start. In many situations, all of a person’s debts are discharged. The debtor then begins with a clean slate. This can be a good choice for someone who has lost their job and cannot pay back much of their debt. Sometimes a new career path after a layoff means a lower income and debt becomes too much of a burden.
What is the negative side to filing for Chapter 7?
Once you file for bankruptcy you will not be able to do so again for seven years, so you must be absolutely sure you are ready for a Chapter 7 filing. This bankruptcy will stay on your credit report for up to 10 years. This means getting very little credit, and when you do qualify for a loan, the interest rates will be very high. It will also be difficult to get a mortgage during this time.
You must qualify
Several years ago new laws were passed by congress to tighten up the bankruptcy laws. Too many people were abusing the system by charging up their credit cards and getting several loans only to file for bankruptcy later. At least this is what creditors were saying. Now, there are both tight income requirements and assets requirements to qualify for a bankruptcy. If your income is above the median income for your state, you may not qualify. If you have too many assets, you may need to liquidate them and pay down your debt before you qualify. It is imperative that you consult with an attorney to determine eligibility for bankruptcy. If you attempt to file yourself and you do not qualify, you will only be inviting lawsuits from your creditors.
Some assets are protected
A bankruptcy judge can make a person sell off assets to pay creditors. They are entitled to their money, and a judge will make sure they get whatever they are legally entitled to. However, certain assets are protected. Examples of these are your home if it is your primary residence and your retirement account, but even in these cases, there can be restrictions. It is important to have an attorney because your creditors can challenge you bankruptcy. An attorney knows the laws and can defend you. Without an attorney you will not be able to defend yourself against your creditor’s attorneys. They will do everything they can to get every penny they can from you.
Some debts cannot be discharged
Some people rush into a bankruptcy seeking to do it alone only to find out that certain debts they have cannot be discharged. Back child support is exempt from bankruptcy as well as most taxes owed and certain monetary judgments against you. Speaking to an attorney will help you understand what debts can be eliminated with a Chapter 7 filing.
Track All Your Accounts With Personal Capital
Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.Bankruptcy can seem easy, and for many people, it is tempting to do it themselves, but this is a mistake. From the first consideration of bankruptcy, you should contact an attorney for a consultation. A bankruptcy may or may not be in your best interest, but with the counsel of an attorney you will be able to take the best financial path for you and do it properly.
Penelope Smith says
I didn’t realize that some assets are protected when you file for chapter 7 bankruptcy. It is good to know that a retirement account and your home can be protected. That is good to know because my older brother has been considering filing for bankruptcy this upcoming year.