If your financial situation has worsened steadily and you are now certain that you will never be able to get caught up on your bills, bankruptcy could present a possible solution. A chapter 7 bankruptcy could allow you to put your poor financial decisions behind you and make a fresh start, but this move is not right for everyone. To help you decide, read on to learn more about what a bankruptcy could do for you.
Unsecured Debt
You may hear a great deal about "unsecured" debt and "secured" debt during your bankruptcy. One of the greatest benefits of a chapter 7 bankruptcy is undoubtedly the ability to have all of your unsecured debt "forgiven." Normally, the average consumer carries quite a large credit card balance load, often with punishingly high minimum balances required each month. The good news for potential bankruptcy filers is that, in most cases, all credit card debt is considered unsecured and, therefore, goes away completely with a bankruptcy filing.
A lot of burdens can be lifted with a chapter 7 bankruptcy: no more calls and letters from credit card bill collectors, no more struggles to make even the minimum payments each month, and no more obligation to pay a dime more to the credit cards creditors, without a loss of any property.
Secured Debt
If there is one possible consequence that strikes fear and trepidation in the hearts of bankruptcy filers, it's the potential for the loss of a home. If you are already behind your mortgage payments, you are likely facing the threat of foreclosure, and your credit is probably negatively impacted by the late payments. Unfortunately, the filing of a chapter 7 bankruptcy on any foreclosure proceedings is only temporary, depending on how far behind you are. In some cases, you may be able to get caught up using the extra funds from those credit card payments.
Another test must be met for homeowners when it comes to bankruptcy, however. Since your mortgage is considered a secured debt, the bankruptcy courts have the ability to seize your home and use the sales funds to help pay some of your creditors. The ability for them to take this action depends on how much your homestead exemption is in your state, the value of your home, the amount of equity you have in your home, and how much debt you are declaring in your bankruptcy.
For those facing the possibility of foreclosure, a consultation with a bankruptcy attorney is vital, so reach out for help today and find out if a bankruptcy is right for you.
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