You probably already know that a bankruptcy could be in your future if you are experiencing some (or all) of the following red flags:
- You are using credit cards to pay other bills
- You are getting cash from your credit cards to use for living expenses
- You are being contacted by creditors constantly due to past due bills
- You are being threatened with the loss of a vehicle due to repossession
- You are being threatened with loss of a place to live due to foreclosure or eviction
Bankruptcy may be right for you, but you should understand what you are doing if you file. Read on to learn more about the good and some precautions if you file for a chapter 7 bankruptcy.
The Good
Most people have a lot of credit card debt, and this single form of debt load and how bankruptcy treats it represents one the most advantageous aspects of filing for a chapter 7 bankruptcy. Credit card debt falls into the unsecured category, which means that no property is used as collateral. No property used means that no property can be lost, so a filing can mean that all of the filer's credit card debt will disappear. Furthermore, you don't have to wait until the bankruptcy is final to benefit from this good thing, as soon as your filing hits the federal courthouse it becomes effective. You can stop paying anything at all towards that debt and you need never have another creditor contact you in relation to that debt. Of course, you must cease using the cards upon your filing.
Some Precautions
Not all of your debt is unsecured, and it is the secured debts that could mean property loss. In most cases, your secured debts will consist of your home (if you have a mortgage) and your car (if you owe money on it). When you don't pay, you can be subject to loss, and a bankruptcy filing will buy you some time, but eventually you must bring your payments up to date.
There are some additional considerations for property like homes and cars, however, even if you are not behind on the payments. You are allowed to keep only so much property with a chapter 7 filing, so there is a small chance that you might need to forfeit something. There are several factors at play here, and the question of whether or not you will lose a given piece of property depends on your individual situation, so ask your bankruptcy attorney for more information. For example:
- Your state offers homestead and personal exemptions that may allow you to keep some of your property.
- You may be allowed to double your exemptions if you file jointly with your spouse.
- The more money you owe on your property versus the value of it, the more likely you are to be able to keep it.
- The total value of your bankruptcy matters; if your bankruptcy contains only about $100,000 in debt, you likely won't face the forfeiture of a home worth more than that.
Contact an attorney, like Lazaro Carvajal, for more help.
