If you’re reading this article, you’re probably having a problem with debt – and maybe a very big problem. Maybe your credit card debts have gotten out of control or you’re facing a huge mound of medical bills. You might be in trouble with several credit card providers and personal loan companies. But none of this really matters. You want to get out of debt and you’re thinking about declaring bankruptcy.
It’s not an ultimate solution
You may have seen ads were you could get a bankruptcy done for $400 or $500. Many of them promise to get you debt free, a new start, a fresh start and so on. Don’t believe these ads. While a bankruptcy will discharge many of your debts, it cannot discharge all of them. In fact, it cannot even get rid of all of your unsecured debts.
What a bankruptcy can and cannot do
Most people who declare bankruptcy choose a chapter 7 bankruptcy. It is a “liquidation” bankruptcy as its purpose is to liquidate your assets to raise money to pay off your creditors. A chapter 7 will eliminate credit card debts, medical bills and most personal loans. However, it will not get rid of student loans, past taxes owed to the state or federal government or child support and alimony.
What you can and cannot keep
As mentioned above, the purpose of a chapter 7 bankruptcy is for your assets to be liquidated so that your creditors can be paid. However, there are some assets that are protected from liquidation. You should be allowed to keep your home, your automobile, any tools required in your job, your retirement fund and your personal possessions, including your furniture.
However, there are caveats. In most states, you are allowed to keep the equity in your house so long as it is not more than $50,000. You may also be allowed to keep $3,000 of equity in your automobile or $6,000 if you and your spouse jointly file for bankruptcy. What happens if you have, say, $100,000 in equity in your home? Then the bankruptcy judge or referee could order your house to be sold so that you would be basically out in the street.
Treasured possessions
If you choose a chapter 7 bankruptcy, you could also lose your most treasured possessions. That could be jewelry you inherited from your parents, a boat, motorcycle, a travel trailer or your collection of rare coins or vintage recordings.
The whole world will know
One of the worst things about declaring bankruptcy is that it will be a public record. Anyone who wants to know about your history, including potential employers, mortgage companies, finance companies and the like will be able to see that you have had a bankruptcy. Some employers simply will not hire people who have had a bankruptcy as they believe this reflects poorly on their character.
10 long years
In addition to being a public record, a bankruptcy will stay in your credit report for 10 years. You may have a very hard time getting a new mortgage or buying an automobile for the first few years and it could come back to haunt you eight or nine years later. You will probably be inundated with offers for credit cards just a few weeks after you complete your bankruptcy but these will be cards that come with incredibly high interest rates.
Try debt settlement instead
Debt settlement is a good alternative to filing for bankruptcy because it can get your balances and interest rates reduced and will not have as serious an effect on your credit report as would a bankruptcy. We can contact your creditors and negotiate settlements that will probably save you thousands of dollars. We can also help you with a payment plan that will enable you to become debt free in 24 to 48 months. Call our toll-free number today for more information about debt settlement. It could be just the answer you’ve been hoping for.