If you’ve seen your debt grow to a point where you can no longer keep up with even minimum payments, it may be time to consider bankruptcy. I can take a look at your finances and help you consider alternatives to bankruptcy first, and if it looks like the best idea to move forward, we’ll conduct the means test to determine which chapter will serve you best. Many consumers choose a Chapter 7 to discharge most of their debts and make a new start with a clean slate.
All the Facts
Before making an impactful decision such as bankruptcy, it’s necessary to weigh the pros and cons of each scenario. The fact that a Chapter 7 will be resolved in just a matter of months and quickly discharge most types of debt makes it an attractive option, but bankruptcy is never free of consequences.
Your credit report will show that you filed a Chapter 7 for 10 years, but don’t let that keep you from doing what you need to do. As soon as you file, you put an end to missed payments and high debt balances, so you can begin to rebuild your credit right away. Sooner than you think, your new positive credit activity will overshadow and outweigh your bankruptcy.
You may feel vulnerable thinking about the possibility of not having access to credit after filing, especially if you’ve used credit cards as your emergency fund. But, with your debt gone, this is a perfect opportunity to create and stick to a realistic budget and to build up your savings account. Also, after you file, you can start working on rebuilding your credit by applying for a small credit card; be prepared to start with a secured card with a high interest rate and to always pay off your balance completely each month. After some time, you’ll also be able to get an auto loan, as long as you can provide a substantial down payment. Purchasing a home will take more time, but could be possible within a few years.
It’s true that you may lose some of your property when you file a Chapter 7, but stories of people who are left destitute are simply myths. The many exemptions that the federal government allows can be used to protect your property and assets, and we’ll work together to set up your case to preserve what you’ve worked so hard to acquire. For many people, sacrificing some assets is worth getting rid of debt that has been holding them back for many months or even years.
It can be disappointing to learn that student loans, back taxes, alimony, and child support are not dischargeable through bankruptcy. But one of the benefits of a Chapter 7 is that it can discharge so much debt that these payments can be more manageable.
It’s important to remember that once you file a Chapter 7, you cannot file again for 6 years, so it’s important to consider the timing of filing. I can help you make a plan, but if something does come up later, you can file a Chapter 13. With so much of your debt gone, your repayment plan payments based on your remaining debt will most likely be fairly low.
While it’s important to take action to tackle your debt, give me a call before you make any concrete decisions related to bankruptcy. I’d be glad to take a look at your debts and income and use my years of professional experience to offer solid advice.