Chapter 7 bankruptcy: programmed to address debts

Debts are troublesome as they rob you off your financial stability and force you to slide into a financial mess, the consequences of which haunt you for several years. Chapter 7 bankruptcy stays in your credit report for a period of 10 years. This can be avoided by opting for the bankruptcy alternatives that can make you debt free in a systematic manner. However, there are many debtors that don’t have any other option but to file bankruptcy.

Majority of the consumers file either Chapter 7 or Chapter 13 bankruptcy. Filing bankruptcy has become a lot more difficult with the introduction of New Federal Bankruptcy Laws that were introduced on October 17th 2005.

Types of debts that can be dealt with in Chapter 7 bankruptcy:
You can do away with your unsecured debts when you file Chapter 7 bankruptcy. These may include the following –

• Payday loans
• Credit cards
• Medical bills
• Utility bills etc.

As far as eligibility is concerned, in order to file Chapter 7 bankruptcy, you have to qualify in the Means test. When you take the Means test, your income is compared to the income of a similar household in the state in which you are residing. If your income is less than the state median income, you are eligible for filing Chapter 7 bankruptcy.

Get the protection of Automatic Stay:
When you file Chapter 7 bankruptcy, a court appointed trustee will sell off your non-exempt assets so that your creditors can be paid off. One of the most important aspects of filing bankruptcy is the Automatic Stay that prevents your creditors from coming after you to collect their dues.

Undoubtedly, filing bankruptcy (any type) causes lasting damage to your credit rating but it is not the end of the world. There are many ways you can repair your credit rating but it is definitely a time consuming process as there are no shortcuts to a debt free life.

Do you know Chapter 7 bankruptcy scars your credit rating?

It is believed that filing Chapter 7 bankruptcy allows you to make a fresh start. Does this really happen? Filing bankruptcy may allow you to make a fresh start but it has its own complications too. The number of consumers filing Chapter 7 bankruptcy has increased in number. More and more people are not being able to make payment for their bills. In fact there is a vicious cycle. People are losing their jobs as a result of which they are not being able to fulfill monthly financial obligations.

Whether you file Chapter 13 or Chapter 7 bankruptcy, it gets recorded in your credit report for a period of 7 to 10 years. So, it is best to stay away from bankruptcy as much as possible and try out different bankruptcy alternatives. The bankruptcy alternatives include debt consolidation, debt settlement, debt management etc.

Although filing bankruptcy gives you a fresh start but there is lot you have to compromise with as far as enjoying financial benefits are concerned. Let us see what price you have to pay if you file Chapter 13 or Chapter 7 bankruptcy.
• Your credit rating nosedives
When you file “liquidation” bankruptcy (where your non-exempt assets are liquidated to pay off creditors) your credit rating nosedives miserably. This is true for any type of bankruptcy you file. And it is a well known fact that your credit report is a “financial report card” and whatever you do financially gets recorded in the credit report.
• You may not get a suitable job
There are many employers that don’t hire you if they find bankruptcy filing in your credit report.
• A homeowner may not rent out his premise to you
Filing bankruptcy may act as a hindrance when you want to shift to a rented place. If the homeowner finds out that you have filed bankruptcy, he may not rent out his apartment to you.
• You need to deposit for utilities
If you are requesting for a new service such as home phone, gas, electricity, cell phone, internet or cable TV, you have to pay deposit for the same since you will be treated as “risky” as you have bankruptcy in your credit report.
• You will not get good credit
Whether you file Chapter 13 or Chapter 7 bankruptcy, it will take a long time before you can finally win back a lender’s confidence and get fresh credit again.

So, whether you file Chapter 13 or Chapter 7 bankruptcy, both impact your credit rating in a similar manner. While Chapter 7 bankruptcy remains in your credit report for a period of 10 years, Chapter 13 will haunt you for 7 years.

Bankruptcy: some misconceptions you should stay away from (2)

In my last post, I explained some of those harmful myths on bankruptcy filling, which terribly mislead all Bankruptcy seekers and other people facing debt problems and take a harmful toll on their financial stability. There are some more misconceptions about the procedure of bankruptcy filling, which therefore I want to make you people aware of.

• Husband and wife-both need to file for bankruptcy:
Husband and wife should file it together only if both of them want to eliminate and get rid of those debts which they both owe and both are liable to repay. Otherwise, the spouse who have not filed may be asked by the creditors/lenders to make the total payment of the amount of unpaid debt. Apart from that, it is not always essential that the spouses have to file bankruptcy together.

• A man files for bankruptcy-when life is debt-stricken:
Till date, bankruptcy filling is associated with the issues of social stigma and humiliation….let us not forget to admit this fact. Many of us still nourish this viewpoint that only when people suffer from a severe financial crisis and have got a huge debt burden they can not pay off, they tend to file for bankruptcy to get rid of all. Such incapability to pay the bills or loans in normally believed to have caused due to a lot of bitter experiences people face in their lives, like- divorce or mutual separation, job loss, accidents, or even serious illness.

• Bankruptcy raises credit profile and gets you easy-rate loans:
In one way, bankruptcy is the legal remedy to let you go from all your unpaid debts-undoubtedly, filling bankruptcy indicates your failure to make payment of your loans. Therefore, a bankruptcy can have most negative impact on your credit report, and can badly affect your credit score. Unfortunately, there is a terrible misconception that bankruptcy sets you free from all debts, hence no account of non-repayment or failure of payments of the loans remains in your credit history and your credit rating is improved….but that is wrong. Rather, the black spot of a bankruptcy information remains even for 10 years on your credit report…and your chances to get loans at affordable interest rates are decreased.

• Escaping back taxes is not possible by normal bankruptcy :
Normal bankruptcy filing can not let you go free from all your unpaid taxes, and if you think like many other people that you can escape your back taxes by just a bankruptcy, you are wrong. It is possible only by filling for a tax bankruptcy. This process needs you to file all your returns, and, additionally, all taxes you owe have to be at least 3 years old.

Bankruptcy: some misconceptions you should stay away from (1)

We all know that the event of filing bankruptcy is scary enough. Bankruptcy carries several misconceptions along with. If you have got a heavy burden of debt on your shoulder, you should first look for some other alternatives for setting yourself free from debt problem; bankruptcy should be your last option. But if other doors are not open for you, you have to face bankruptcy. However, some of us do have some wrong myths and misconceptions about the entire process of bankruptcy for which they often face lots of financial problems and hassles in the long run.

I would like to share a relevant list of such misleading ideas about bankruptcy that many debtors among us often come come across with:

• Filing Bankruptcy happens only once
Within a short time span, one cannot file for bankruptcy twice. Many debtors file for Chapter 7 bankruptcy at 6 years interval. Of course one can file for Chapter 13 more often than Chapter 7. But neither it is recommended, nor it looks ideal. The reason: filing more than one bankruptcy often damages your credit rating seriously and destroys your chance of getting lower interest rate loans in future.

• It is impossible to get credit again
The negative impact of a bankruptcy event lasts on a credit report for 7 to 10 years. So most debtors who have filed for bankruptcy think that their credit can’t be regained for that time period….so they can’t avail any loan for a long time. But it is not totally true…for you, mortgage loans or car loans are still available, though a bit difficult to get and the interest rates are higher for you. Those lenders offer sub prime loans at very high interest rates.
You can get offers of credit card too. Here are some essential points on credit card : suppose on the day of filing your bankruptcy, you have a credit card with zero balance; as you don’t have any payable debt on it, no need to include that in your list of filing. Even you are free to work on payment of any unpaid debt while you are filing, though this is not advisable to do so at that moment.

• Bankruptcy filing is very hard
This is a completely wrong conception that filing for bankruptcy is a tough, tedious and complicated job. Rather, the truth is that often filing a bankruptcy can be successfully and hassle-freely done without even seeking help of an attorney-though it is always recommended to have a prior consultation with him about the legal aspects to set yourself prepared before you proceed further.

• Chapter 7 bankruptcy is the one-stop solution for all debts
Certain kinds of unpaid debts are there which cannot be eliminated by filing Chapter 7 bankruptcy petitions. Debts which are not covered by chapter 7 are:
1. alimony.
2. child support expense
3. Fraud related debts.
4. Unpaid student/education loans.
But, many of the debtors belief strongly in this wrong idea that Chapter 7 bankruptcy can remove their each and every unpaid debt.

There are some other misleading thoughts in market regarding bankruptcy which i shall discuss about on next day in the 2nd part of this topic.