Student loans, credit card debts, your mortgage—it’s quite normal to be overwhelmed with a growing amount of debt. When your paycheck doesn’t seem to cut it anymore, and you’re running out of extra cash, you might be ready to throw in the towel in a desperate attempt to free yourself from your debt bondage. If you think about it, bankruptcy has never sounded better—is it the true answer to your financial problems?
Chapter 7 & 13 and why they’re important to you
Before you do anything else, it’s best to understand that there are two (2) different kinds of bankruptcies, mainly: Chapter 7 and Chapter 13 from the U.S. Bankruptcy Code.
- Chapter 7. If you’re looking to eliminating your debt without any repayment plans, this straight bankruptcy plan is the most appealing option for you. However, this seemingly convenient kind of bankruptcy requires you or your household is required to take a Means Test.
- What is a Means Test? This will determine if your income meets the criteria to qualify for a Chapter 7 bankruptcy. Basically, if your income is below the median income in your state (this is different per state and household size), you pass the Means Test with flying colors and you can proceed to the next step immediately. However, if you exceed the test, meaning you have more than enough as disposable income, you will be illegible to file a Chapter 7.
- Chapter 13. Best for high-income earners, this is considered by most a better alternative than a Chapter 7 bankruptcy. With this type of bankruptcy, you’re basically going to be given a repayment plan which takes 3-5 years to complete. Other than that, you will also be given a structured budget or payment plan that the court will monitor so that you will never miss a payment. A benefit of this type of bankruptcy is that none of your property will be seized throughout the payment period. You are not eligible to file a Chapter 13 bankruptcy if you exceed $1,149,525.11 or unsecured debts of more than $383,175.
- A $235 case filing fee will be charged to the client, plus a $75 miscellaneous administrative fee.
Negative effects of bankruptcy
You may come up with your own pros and cons to both these bankruptcy choices, but if there’s one thing that you should know is that you should consider alternative ways to settle your debt first before filing for bankruptcy. Why? Because there are different consequences to this choice.
1. It can be publicized. Considering that filing for bankruptcy is a legal move, there is a chance that your local newspaper would have to publish your name. Your only hope is that the newspapers won’t print it because your name will take too much space—although, of course, creditors would still know that you’ve filed for bankruptcy. This also means…
2. Bankruptcy will always be tied to your name. Once it’s there, it’s forever in the public records that you’ve filed for bankruptcy.
3. You can file for bankruptcy multiple times. This means you can say goodbye to rebuilding your credit score and reputation. If haven’t made the most out of your first bankruptcy case and still ended up in debt afterwards, you might find it hard to file for a loan when lenders see how you find it hard to take responsibility for the debts you owe.
4. It doesn’t solve all your problems. Let’s say you don’t get approved for a Chapter 7 bankruptcy and just a Chapter 13 bankruptcy—how would you cope then? You would still have to pay off everything you owe and now the government has their eyes on your while you struggle to pay your bills. For instance…
5. Your property can be seized. Unless you’re prepared and your assets are protected under exemption laws, your assets can be taken as a means to pay off portions of your debt if you’ve qualified for the Chapter 7.
6. You can still pay off your debt. If you’re still reading this, it means you’ve got wifi or you’re watching TV—both of which are luxurious hobbies. When you’re desperate to pay off a big debt, it’s time to start living below your means. You don’t maintain your current lifestyle, but do all the necessary adjustments—like cutting off certain luxuries until you get to the point where you are able to significantly lower your debt. Finally…
7. There are still available options for you. It’s not completely hopeless. Take this alternative to debt consolidation, for example. Why file for a chapter 7 and risk your assets, or file for a chapter 13 when you’re going to repay your debt anyway? You might as well try debt settlement where you’ll also follow a repayment plan without the hassle of adding bankruptcy under your name! What’s even better is that with debt settlement programs, you’ll be able to pay off what you owe for a much lower amount.
Don’t take the easy way out
Do you solemnly swear to handle your finances better? If you think that you’re still going to handle your money the same irresponsible way, you’re not only looking for deeper and lasting trouble by filing for a bankruptcy claim. If possible, consider bankruptcy as your last and final result.
As we suggested above, consider debt settlement as your best alternative to bankruptcy, and there’s no other reputable debt settlement company like Financial Rescue LLC. In fact, consultation is free, so call 1-877-97-DEBTS now!
The information provided is for informational purposes only, no communication should be considered legal advice.