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It’s not uncommon for people to fall on tough economic times. Job loss, under-employment, serious medical problems, or other emergencies or disasters can lead to heavy debt and money woes. If you find yourself buried under a load of financial stress, there are some ways to get out. Filing bankruptcy may be a possibility for you to get back on track and start over. There are a number of bankruptcy options, including Chapter 7. It’s helpful to understand what this entails and whether it makes sense to you and your family.
Eliminate Debt
Wise financial counselors urge people to avoid high debt, especially when it comes to credit cards. Sometimes, it’s difficult to stay out of debt; it may even seem necessary to use credit cards or take out other types of consumer loans. If you determine it’s otherwise impossible to repay these obligations, Chapter 7 can help. This form of bankruptcy can erase these debts for good. Not everyone will qualify for Chapter 7, however. This type of bankruptcy is meant for people for lower income. If you make too much money, you’ll have to explore Chapter 13.
You Won’t Keep Assets
Your debts don’t simply magically disappear without any consequences. Under Chapter 7, you will be required to liquidate assets in order to pay off what you owe on loans and credit cards. This means you may have to sacrifice your home, cars and other possessions. If this sounds too difficult to bear, you should consider Chapter 13 instead.
Impact to Credit
There are pros and cons to bankruptcy. One factor to keep in mind is that when you file for Chapter 7, your credit score will take a big hit. This event will stay on your credit record for 10 years, making it difficult to, if not impossible, to get loans and qualify for installment payments during this time. However, this negative impact will diminish gradually during this 10-year period.
What Doesn’t Go Away?
You can’t wipe out all debts with Chapter 7. Even by selling some of your assets and possession, this bankruptcy filing won’t help pay off student loans or anything you owe on income taxes. You must also continue to pay alimony and child support payments to a former spouse.
It’s best to talk to a Memphis, TN bankruptcy attorney if you are thinking seriously about filing for Chapter 7. This professional an advise you on whether this is your best decision to help you cope with your struggles. Thanks to Darrell Castle & Associates, PLLC for their insight into bankruptcy law and chapter 7.