When you hear people talk about bankruptcy, you hear them talk about different chapters. So just what is a Chapter 7 bankruptcy?
When most people think of bankruptcy, they think of Chapter 7. This is found in Chapter 7 of the bankruptcy code, and refers to a basic, clean slate for most people. Traditionally, this is the type of bankruptcy where you file, turn in any assets you have to be sold by the Court, and then in a few months, all of your debts are gone and you can walk away to start over. If most of your debts are medical debts or credit cards, and you don’t have a lot of equity in a house or car, you can most likely keep your house and car, and just wipe the slate clean.
Sounds great, doesn’t it? Well, there is always the down side. It does last on your credit report for up to 10 years. This will make it harder to get a loan in the future, but it isn’t impossible. These days more and more lenders are agreeable to lending, but the interest rates will be much higher. It can make finding an apartment or rental house more difficult as many landlords aren’t sure about the risk. They may ask for an additional security deposit to protect them if you cannot pay your rent. But, overall, bankruptcy is so common (particularly after the 2007/2008 recession) that it is possible to live normally post bankruptcy. Some credit cards even lend within months of filing bankruptcy. However, if you start getting new debt and find yourself back in the same boat in a few years, Chapter 7 may not be available to you again. You cannot file a second Chapter 7 bankruptcy within 8 years of a previous Chapter 7 discharge.
Additionally, there are a number of debts that cannot be wiped away by bankruptcy, most commonly child support/alimony, taxes, and student loans. But, for some, if you can get all the other debts wiped out, there is a way to manage the payments you need to make on these types of debts and still make ends meet.
We are here to answer your questions, show you what options you have, and explain what your new future can look like. Call today for a free, no obligation consultation!