Friday, March 8, 2013

Signs That Chapter 7 Bankruptcy Is The Right Debt Relief

When you are thinking about getting out of debt, one of the first things that may come to mind is to file for bankruptcy. This is the hands down, the fastest and easiest way to get rid of your credit obligations. However, it is also the one that leaves so much mess that if could take a decade to completely remove the stain on your credit report.

In the past, bankruptcy meant liquidating your assets, distributing the proceeds to your different creditors and being free of debt in a matter of months. While that is still true, this is only applicable to Chapter 7. A means test was put into place to separate those who has a salary that is within or higher than the average median income of the State where they chose to file bankruptcy. If they have a high salary, they will be asked to file for a Chapter 13 bankruptcy which usually involves a repayment plan that is similar to debt settlement. You are tasked by the court to pay a percentage of your debt and once you have completed the payment, the rest of what you owe will be forgiven.

Between the two options, Chapter 7 seems like the better choice. If you have to deal with the dreaded stain on bankruptcy, then you may want to stay away from the one that requires you to shell out an amount via the repayment plan. You want to be free from your debt with the least amount of money spent on payments.

However, you need to consider first if it is really the only option that you have. There are bankruptcy alternatives that does not have the same credit damaging effects but can still help you get out of debt easily.

To help you decide, here are the signs that Chapter 7 is the best alternative.

First of all, you should have a very small income. If you want to enjoy the no debt payment benefit of Chapter 7, then you need to have no or very little income every month. If your salary is within the median range, then you may be subjected to the payment plan. If that is the case, you may be better off with debt settlement.

Another sign to proceed with bankruptcy is when you do not have assets to liquidate. Unless it is okay with you to lose the expensive assets that you have, you may be better off to aim for debt settlement or even Chapter 13 bankruptcy. Because of the repayment plan, Chapter 13 does not require asset liquidation.

Chapter 7 is also great for unsecured debts. These could be medical bills, personal loans and credit card debt. It cannot cover student loans, tax related debts and child support.

Ideally, a bankruptcy lawyer should be consulted to see if this is really the right path for you to get rid of your debts. The main basis is your finances - especially your debt payment capabilities. Listen to the expert and trust your gut instinct. More importantly, you have to make the commitment to finish your chosen debt relief program.

1 comment:

  1. It is always said that filing bankruptcy should be your last option when you plan to get rid of your debt. But at times, situations are such apart from filing chapter 7 bankruptcy and getting a discharge from all your debts, no other option works out. However, it is always recommended that before taking any step in this regard, it is always better to take the opinion of a bankruptcy attorney. The bankruptcy attorney will help you take the means test and let you know whether or not you qualify for Chapter 7 bankruptcy filing. In case you don’t qualify for Chapter 7 bankruptcy, you will have to go for the option of Chapter 13 bankruptcy.