When you start to consider bankruptcy, you’ll be faced with two options: Chapter 7 or Chapter 13. Chapter 7 is sometimes referred to as a liquidation bankruptcy, because you have to dispose of all your assets. However, you can also discharge all your debt.
Chapter 13 allows you to keep some of your assets, as long as you repay them on a payment plan. It will also allow you to discharge some of your debt, but not all of it. Despite which you choose to file, you should list all your debts, and ultimately let the court decide to allow or disallow it.
It Is Harder To Get A Chapter 7
Odds are, you’ll be tempted to get a Chapter 7, if you have few assets. Not everyone can do so, now, since the laws have changed. There are limits on your income and assets that you must meet. This keeps fraud to a minimum. Chapter 13 will allow you to keep your assets as long as you maintain a good standing in your payment plan, but it can also require that you pay off debts, not liquidate them, including payday loans. It all depends on whether you are eligible for Chapter 7 or whether you will be forced to use Chapter 13.
If You Want To Save Your Home
Chapter 13 is often filed to stave off a foreclosure. It has to be done within a certain time period and can be affected by state regulations on foreclosures and bankruptcy. However, if you’re behind on your mortgage payments, and still want to fight for your home, you should seek advice from a bankruptcy attorney specializing in Chapter 13. It can be that some arrangement can be worked out that allows you to pay back all your creditors and keeps your home from foreclosure too.
What Type of Debt Do You Have?
The type of debt is going to also influence whether you can file Chapter 7 or not. Secured debt often requires a repayment plan of some sort, while unsecured debts like a payday loan, credit card debt, and more can be liquidated when you have few assets. Talk to a bankruptcy lawyer to determine what plan you can file under and which debts will be discharged and which might be negotiated into a payment plan. The laws can vary by states.
What to Do after Filing
If you are counseled to file Chapter 13 or Chapter 7, be aware that your credit will be ruined for a number of years going forward, most often a minimum of 7 years. That will either mean little to no credit, or very high interest rates. Your credit accounts will most likely be closed down, and getting other types of conventional credit will be hard. There are some other alternatives, however, and you need to investigate those ahead of time. That’s why you really have to know what you are getting into when you decide to file bankruptcy. It’s not a cure-all for financial problems, and the road back to creditworthiness is a very difficult struggle.
You will want to line up forms of credit that don’t rely on your credit history, in the case of a future emergency. Payday loans are one such loan type that allows people who have suffered a bankruptcy to begin to rebuild their credit histories, a little at a time. They do not require a credit check, but do fall on your credit history if you decide to take one out. Just pay it back in time, and you will begin to establish a record of paying off lenders that over time can help your raise your credit score.
Loading ...