You say you’re so deep in debt that you can’t see any way out? You’re getting harassing phone calls from debt collectors and credit card companies and are worried that your wages might be garnished? Then you see one of those ads promising to handle your bankruptcy proceeding for less than $500 and ask yourself, why not?
The two types of bankruptcy
If you do decide this would be your best option, it’s important to understand that there are two types – a chapter 7 and a chapter 13.
Most people choose a chapter 7 because it’s a way to eliminate certain debts. In comparison, a chapter 13 is more a way to reorganize and then pay off your debts.
A chapter 7 bankruptcy
People who choose this type of bankruptcy are required to file a number of documents with the court, including a list of assets and liabilities and current income and liabilities. You’ll also be required to go through credit counseling and provide a statement that you did so.
What happens after you file
Once you file for a chapter 7 bankruptcy, you will be assigned a trustee who will oversee your case. He or she will review all of your assets and determine whether they are exempt or nonexempt. In most cases, your assets will all be exempt. This includes items such as equity in your house, equity in your car, your furniture and other such personal possessions. In the event that the trustee determines that you do have nonexempt items, your creditors can file a distribution claim to have them sold so they can be repaid some of what you owe.
Which debts will be discharged?
A chapter 7 bankruptcy generally will discharge most of your unsecured debts. This typically includes credit card debts, personal loans, medical bills, past-due utility bills, bad checks (unless there was fraud involved), civil court judgments and revolving charge accounts.
The first hidden danger
Contrary to popular opinion, a chapter 7 bankruptcy will not eliminate all of your debts. It will not discharge taxes and tax liens, student loan debt, alimony and child support, debts obtained through fraud, condominium or co-op association fees and several other types such as debts obtained through false pretenses, false representation or fraud.
Hidden dangers 2 through 5
The second and biggest negative of a chapter 7 bankruptcy is that it will stay on your credit report for 10 years. That’s 10 years during which you will find it very difficult to get any new credit or at least at decent interest rates.
You may find it next to impossible to get a new mortgage or even rent a house or apartment during those years. You will have to give up all your credit cards and you may lose some of your possessions. For example, if you own a boat, a travel trailer or a second home, you can kiss it goodbye, as it will be sold to satisfy some of your debts.
Finally, if you choose a chapter 7 bankruptcy but the court finds that you have a certain amount of disposable income, it could decide to convert your case into a chapter 13. This means that instead of being free of most of your debts within 4 to 6 months, you would be required to pay them over a 3 to 5 year period.
Many families choose debt settlement
Many families let us do debt settlement for them as it will not have as serious an effect on yjrot credit as filing for bankruptcy. Our debt counselors can negotiate settlements with your creditors that will save you thousands of dollars and help you become debt free in 24 to 48 months. It’s a great solution for people who want to get out of debt but don’t want to have a bankruptcy on the record. Call our toll-free number today for complete details.
I am an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis' facing consum