Is Bankruptcy Really The Only Choice You’ve Got?
April 8, 2008 – 8:37 amIf your finances are in a mess, you may have considered bankruptcy. Even though your debt may be wiped clean, there are many other end consequences.
If you find that you can’t seem to pay your bills every month, you may consider filing for bankruptcy. As a consumer you have two choices: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is when all your assets are sold off in order to pay all or part of your debt. With Chapter 13 bankruptcy, it’s more of a debt restructuring and you will make a plan to repay part of the debt overtime to your creditors.
Your credit will be damaged if you file for bankruptcy, maybe for as much as ten years. If you apply for any credit during that time the creditor will be informed of the bankruptcy.
Previously, people have taken advantage of bankruptcy laws. They were allowed to file more than once for Chapter 7 so many used it to wipe out all their debt.
Individual states decided on what if any assets will be excused from seizure for a bankruptcy. In knowing that, people used any available cash to purchase things like cars and homes to avoid payment while still keeping their personal items. If this happens, very often the creditors would get very little back from the settlement.
The new laws concerning bankruptcy have changed this. Whereas courts used to have the leeway of deciding who could file for Chapter 7 bankruptcy, there are now criteria that must be met first. In order to file for Chapter 7 bankruptcy, a person has to have an income that is below the median income for the state where they live. Their income must be put through a calculation that determines if they have enough disposable income to pay twenty-five percent of their outstanding debt.
More people will have to file for bankruptcy under Chapter 13. The courts will decide the amount of repayment from facts that they receive. An allowance is made for rent or mortgage, food and other relevant bills. With the new laws, the IRS regulates the value of each bill, exempts a certain amount, and payments are decided from the rest.
Lawyers are charging more than ever because declaring bankruptcy has become much more involved. The whole process will cost the client much more than before which will hopefully make them think twice about filing. Credit counseling is also required as a first step before filing bankruptcy. The counselor may be able to help you and rule out the need to file.
Filing for bankruptcy is a major issue and should not be taken lightly. Although it clears your debt, it does come with its own price tag.
Tags: Bankruptcy
Related Posts
Print This Article :
