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Miscellaneous
Clarifying Bankruptcy: Chapter 7 Bankruptcy
A bankruptcy filed under Chapter 7 is a liquidation petition. This filing can wipe out many (if not all) of your debts. In this bankruptcy, you stand to lose property since it will be taken by the bankruptcy trustee to sell and its proceeds distributed among your creditors to help pay off all or part of your debt. Unlike what is commonly believed, you won’t be living out of a cardboard box after you have filed for a Chapter 7. There are exceptions under state law but in all likelihood, you will be able to keep most of your property. Mortgage, car loans, student loans, child support and income taxes that are less than three years old are not exempt under Chapter 7.
Although it used to be easy to file for liquidation before, amendments to bankruptcy laws in 2005 now require that those who want to file for Chapter 7 take the Means Test first. No, this is not a graded academic test like what you have to take in school. Rather, this is a formula that uses your predefined income and expenses to determine if you are eligible for a Chapter 7 bankruptcy. You only qualify for a Chapter 7 bankruptcy if your household income is below the median income in your state.
In the event that your monthly income is higher than that of the median income of the state, further calculations are performed to determine if after all the expenses are figured in, you still have enough left over to pay off your debt. There are online means test calculators that will help make the calculations easier. In case you fail means testing, your option is to go for a Chapter 13 bankruptcy.
So as you can see, Chapter 7 is best for those who are under a huge pile of debt, have little or no income and no special assets that can be lost because of the liquidation. A Chapter 7 bankruptcy will stay on your credit report for ten years and is one of the most well-known credit score “killers.”
Clarifying Bankruptcy
Tagged with: Amendments • Bankruptcy Chapter 7 • Bankruptcy Laws • Bankruptcy Trustee • Car Loans • Cardboard Box • Chapter 13 Bankruptcy • Chapter 7 Bankruptcy • Child Support • Credit Score • Creditors • Household Income • Income Taxes • Killers • Less Than Three Years • Likelihood • Liquidation • Means Test • Median Income • Millionaire • Property Mortgage • Student Loans
Filed under:
Credit Repair
Clarifying Bankruptcy: Reasons to File for Bankruptcy
Just because you can’t pay the bills this month does not mean that you should file for bankruptcy right away. Bankruptcy should always be considered as the last resort when you are in the midst of a financial crisis. It is a life-changing event that does not only affect your credit rating (and hence your ability to get new credit) for years, it can also ruin relationships, break families, and cause breakdowns. As much as possible, you should try all avenues to straighten your financial mess before opting for bankruptcy.
However, there are times when bankruptcy is the only viable option. These reasons are listed below:
The most common reason why individuals file for bankruptcy is unemployment. When you lose your job and still can’t find one even after a few months of intense searching, the bills may pile up, savings get depleted, and it may even be difficult to put food on the table. Even if you get hired for a job that offers lower pay, paying the bills might seem impossible without losing the house or the car. Unless outside help can be gained from friends or family or a well-paying job can be found soon, bankruptcy could be a way out of a precarious situation.
Another reason is severe illness that has drained you and your spouse of all your finances. A lot of bankruptcies filed in the United States have to do with overwhelming medical bills and maintenance medications that leave little room for meeting other financial obligations.
Finally, bankruptcy is filed if you want to prevent lawsuits from being filed against you. If you don’t settle with your creditors, you may find yourself being slapped with a case that will worsen your financial situation. If you don’t defend yourself, you might find yourself slapped with an automatic judgment which could worsen your financial situation. If you choose to appear in court, you still have to pay a lawyer which you might not be able to afford at this point. A bankruptcy petition can serve as a mantle of protection from lawsuits. It will also stop those collectors from constantly calling and harassing you under the principle of the “automatic stay.”
Clarifying Bankruptcy
Tagged with: Avenues • Bankruptcies • Breakdowns • Credit Rating • Creditors • File Bankruptcy • File For Bankruptcy • Financial Crisis • Financial Mess • Financial Obligations • Financial Situation • Food On The Table • Judgment • Last Resort • Lawsuits • Maintenance Medications • Medical Bills • Midst • Millionaire • Precarious Situation • Viable Option
Filed under:
Credit Repair
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