Jan 12
13
Help With Debt: the Consequences of Bankruptcy
Help With Debt: the Consequences of Bankruptcy
Article by Kevin Scott Smith
During times of sky-rocketing debt and people seeking relief from debt collectors, the thought of filing for bankruptcy will undoubtedly cross the mind of thousands of people. This article is intended to point out the new consequences of filing bankruptcy under the new laws and how they may effect you and your finances. In October 2005, Congress made sweeping changes to the old bankruptcy laws allowing more incentives for consumers to file bankruptcy under Chapter 13 rather than Chapter 7. For More Information:
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Filing for Chapter 13 will allow you to keep some of your necessities such as a mortgage, car, and property as long as you have a steady income. In Chapter 13 the Court System will set up a repayment plan for you that will allow you to pay off your debts in a period ranging from three to five years. Filing differently may cause you to lose and surrender property that you that may have otherwise been able to keep. Once you have satisfied all payments under the plan you will be released from the your obligations and no longer have to pay under Chapter 13.
Chapter 7 on the other hand, is known as a straightforward bankruptcy. Only property that is considered exempt in the eyes of the courts will be protected from ending up being placed in the hands of a trustee to be sold. In some cases, the property itself may be turned over to your creditors for payment. Some of the items most likely exempt from this would be a homestead property, a car, and whatever means you need to make a living, such as tools and equipment. This is a major difference than filing Chapter 13 that you need to be aware of.
Other Changes:
The time frames have also changed that a person is allowed to re-file for bankruptcy. Under Chapter 13, a person can re-file in as little as two years. However, under Chapter 7, the law has changed to eight years. Undoubtedly the law was created to keep repeat filers from filing Chapter 7 on what seemed to be a regular basis.
Common aspects of both types of bankruptcy are the probabilities of stopping foreclosures, delaying it anyway, and protecting other assets from repossessions, wage garnishments, utility shut-offs, and other debt collection activities. However exemptions tend to vary from state to state and consumers need to check with their state bankruptcy laws to be clear on what is exempt and what is not.
Consumers also need to be aware that filing bankruptcy will not provide an avenue to stop paying child support, alimony, taxes, fines, and some forms of student loans. You also need to be aware that if you don’t have a legal Chapter 13 plan that allows you to catch up, bankruptcy will not stop a foreclosure process and allow you to keep a property with a lien or mortgage on it.
Another major consequence for filing either chapter 13 or chapter 7, is that you are required to get credit counseling from an approved Government debt counseling service. You must take credit counseling within 6 months of filing.
And perhaps the biggest consequence of all when filing bankruptcy is the negative impact it will have on one’s credit report. Even if your credit is tarnished before bankruptcy, having a bankruptcy listed in your file is going to have a huge negative influence on your creditors in the future.
If you would like to find out more information on bankruptcy and how to avoid it all together by looking into debt settlement options, please visit our site at:
About the Author
Help With Debt Problems
You can get reviews and recommendations of Debt Settlement Companies at:http://thedebtcalvary.com Kevin Scott Smith is the editor and webmaster for The Debt Calvary Website where you can get reviews and rating of debt settlement companies.
