Find Out Which Money Problems Can Be Cured By Bankruptcy

Find Out Which Money Problems Can Be Cured By Bankruptcy

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If you are struggling with money problems, you may be considering filing bankruptcy to get rid of all of your obligations. While bankruptcy should be your last resort due to its lasting negative effect on your credit history, it may be the only option in many cases, at least if you want to prevent getting sued or becoming homeless. Consider a few details to know before you file.

One of the most frequent categories of bankruptcy is chapter 7, which involves liquidating your items. This means that you must sell most of your non-exempt items, and then pay off your debts with the profits. The perk of this route is that you can get rid of most of your bills, even if the proceeds from selling your assets do not completely pay them off. This way, you will only have to pay a part of your past due debts, or even none at all if you have few items to sell. Despite the requirement of selling most of your belongings, you are permitted to keep your house in many cases, though you may have to sell it if you have lots of equity in it. You can also keep one vehicle, as long as you can prove that you need it to get to work. Otherwise, most other items are sold to pay off credit card bills, medical expenses, and various other unsecured debts.

Another type of bankruptcy that can help solve money problems is chapter 13. Unlike chapter 7, you will have to pay back the majority of your lenders, but you can often negotiate a reduced amount. You will have to create a payment plan, to which your creditors and the court must agree, allowing you to pay your creditors over a period of three to five years. After the time period for the payment plan is up, you will be considered debt-free, lowering your money problems. This chapter allows

Be aware that bankruptcy cannot cure all money problems, as some liabilities must be paid. For example, you cannot avoid paying child support or alimony. Back taxes that you owe from less than three years ago also have to be paid, as do school loans. Additionally, you cannot hope to keep a secured asset without paying for it. This means that you cannot stop paying your mortgage or vehicle payment, and expect to keep these items. Anything that can be taken back by the creditor will be, which is why you need to keep current on payments for your home, auto, electronics, and any other tangible belongings. Otherwise you will lose them.

In general, if the majority of your money problems revolve around unsecured debts like credit card bills, medical expenses, or unpaid personal loans, you can declare bankruptcy. However, this is not a method to get out of paying back child support, student loans, or past due taxes. Talk to a lawyer if you are unsure of whether to file bankruptcy to solve your money problems.

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