We’ve all heard about bankruptcy. The only thing that really applies to you is Chapter Seven. Which is also referred to as a liquidation bankruptcy.
Basically it reduces all debts that are legally capable of discharge. Chapter 13 is usually called a reorganizing bankruptcy. It basically reorganizes your debt into priority payments over a period of three to five years.
Basically in order to qualify for Chapter Seven, your income has to fall below the median income for your state. That’ss just one of the qualifications. If you make more than the median, you’re probably not going to qualify for Chapter Seven. If it is higher, then you have to take a means test to establish your eligibility. It’s a formula that determines your debt to income over the past six months and determines whether or not you have enough money to pay creditors.
If you fail the means test, you’re going to have to file Chapter 13. I don’t recommend filing for Chapter 13 because it makes you affirm all of your debts, which takes away a lot of powerful techniques down the road. And you’re probably going to be paying back a large portion of what you owe and the dropout rate is pretty high.
In Chapter Seven, any assets you have over and allowed value will be sold, which is why it’s called a liquidation bankruptcy. Partially satisfied creditors and the rest of your qualifying debt will be forgiven. The process takes from four to six months and you’ll be required to complete a credit counseling program with a government approved agency.
You will not qualify for Chapter Seven if you filed for another bankruptcy within the past six to eight years.
In Chapter 13 filings you get to keep your assets but you have to agree to pay some or all of what you owe the creditors over a three to five year period.
You’re going to be required again, to enter a credit counseling company from an approved agency and priority debts like child support. Tax obligations must be paid off in full and are not included in the restructuring plan. This is actually also true in Chapter Seven. You’ll be required to make normal payments on secured debts like home loans and auto loans.
Once you reaffirm the debt, again, something that I wouldn’t recommend, money leftover will go towards repaying unsecured debts like credit cards. When the repayment period is over, anyremaining balance that you owe will be eliminated in Chapter 13.
Bankruptcy can eliminate credit card debts, personal loans and unsecured debts. It can end creditor harassment and collection agencies, and also may stave off repossession and foreclosure. But bankruptcy cannot prevent repossession. Bankruptcy eliminates unsecured debt bit it does not remove secured loans.
If you secure a loan with property, bankruptcy eliminates the loan but the lender is still allowed to repossess the property. It does not wipe out child support and alimony.
Even if you file for Seven, these debts are considered priority debts and must be paid. It does not eliminate outstanding student loans unless you can prove undue hardship. It doesn’t wipe out tax liability except in rare situations in Chapter Seven. And, it doesn’t wipe out judgments, fines, penalties or traffic tickets.
You can see the government is usually always going to get paid and if you’re a deadbeat dad or husband, you don’t get off the hook either.
Bankrupty pros: Collection activities do stop. The court will issue an automatic stay on collection activities and pending lawsuits. If you qualify for Seven, you can get rid of most of your debt and get on with your life in a matter of months. Chapter 13 allows you to keep your assets and potentially eliminate unsecured debt. The cons is that bankruptcy is a nuclear bomb to your credit score. The fallout is going to stick around for seven to 10 years, and it’s going to make borrowing much more costly and difficult.
Chapter 13 is the least favorable and most common form of bankruptcy because most people don’t apply, or don’t qualify for Chapter Seven thanks to changes in the laws in the Bush era.
And, it’s a very expensive proposition in the short and long term. You affirm your debts, again, this is a con. You affirm your debts in Chapter 13, making it more difficult to employ other debt relief tactics that you would learn in my program.
The bottom line is if you qualify for Seven, it’s a viable debt relief option.
But, it does cost $1,000 to $2,000, even the simplest bankruptcy. Most people don’t even have that kind of money laying around but if you do qualify and do have that kind of money, which those two things are unlikely, it’s a good way forward aside from the damage to your credit report.
But if you only qualify for Chapter 13, I think you should look into other definitely options like this program obviously. By reaffirming your debts in 13, you’re giving up all your rights to dispute any of that debt down the road which as you’ll learn, can be a powerful debt relief strategy.
As you can tell, none of these are great options for you.
So if you're ready to get the best debt program on the market, click the link below.
