The number of people who have chosen to declare personal bankruptcy has risen sharply in recent years. Lately, the U.S. bankruptcy court statistics revealed that 1,057,686 people filed under chapter 7 in the last 12-months alone. Ill health, redundancy and serious debt often mean that it is no longer possible to make debt repayments due to a reduction to disposable income. Although nobody really wants to become bankrupt, it’s an effective way to tackle debt problems without the need to make repayments to creditors for the next x years. Filing for chapter 7 bankruptcy allows that person to become free from debt in just 4 months.
Eligibility Criteria to Declare Personal Bankruptcy
In 2005, new bankruptcy laws were introduced to prevent the old system being abused. The Bankruptcy Abuse Prevention and Consumer Protection Act aims to ensure that those who are in a position to repay their creditors do so. The main considerations include:
- It’s not possible to file chapter 7 if already done so in the last 8 years.
- All non-exempt assets, including a second home, valuable collection or luxury vehicle, must be handed to a court-appointed trustee.
- Although a bankruptcy attorney may be able to help, there is a basic requirement that the filer’s income should be below the median for the state that they live in.
- If it isn’t possible to file for chapter 7 bankruptcy, that person can tackle debt by filing under chapter 13. This involves making a payment to creditors each month for a 3 or 5 year period. Declaring bankruptcy means that full court protection from creditors will be provided. Other than affirming debts, it is illegal for creditors to make contact in an attempt to collect debt.
When is it Sensible to Become Bankrupt?
It is normally only advisable to declare personal bankruptcy to deal with serious debt problems like that involved in the jack998. The definition of ‘serious’ may vary between families, but it should only be considered an option after other bankruptcy alternatives have been explored. When there is no money available to offer creditors, filing for chapter 7 bankruptcy could prove to be the right option.
Filing Chapter 7 Bankruptcy and Career Options
Career is an important consideration when looking for a way to get out of debt fast. There is an obligation to inform employers regarding insolvency and this may rule out that person from working in a certain profession. Legal, financial and certain government and security positions are more likely to be affected than others. It could even lead to losing an existing position so check whether financial solvency is an important criteria prior to proceeding with a debt free plan.
Declaring Bankruptcy and Credit Scores
Filing chapter 7 bankruptcy will show on a personal credit report for a period of 10-years. Although steps can be taken to get a higher credit score, it will be far more difficult to get approval for loans, car finance and credit cards. Should someone opt to become bankrupt to tackle debt, it will be necessary to make lifestyle adjustments. Most people will need to live without credit after discharge for a couple of years. Borrowing money will be far more expensive due to the higher probability of default.
Chapter 7 Bankruptcy and Credit Card Debt Elimination Solutions
The March 2010 Federal Reserve’s G.19 report on consumer credit revealed that the median amount of unsecured card debt stood at a staggering $15,788. Declaring bankruptcy and credit card debt regularly go hand-in-hand, especially if the amount owed is neither affordable or sustainable over the longer term. Chapter 7 credit card debt bankruptcy is the leading debt free solution for negotiating unsecured personal debt problems with full legal protection from the courts. It cannot be used to eliminate secured debts, federal taxes, student loans or alimony.
Chapter 7 Bankruptcy and Credit Card Debt Solutions
Filing for bankruptcy provides a fresh start to any family who is not in a position to offer creditors a monthly payment through a debt relief program, such as a debt settlement program or debt management plan. Although not everyone will be eligible for chapter 7, credit card debt elimination can be achieved in as little as just four months. It is not usually suitable for consumers who owe a small sum of money due to the cost of hiring a bankruptcy attorney and the effect it has on a personal credit rating. It is a way of tackling serious unsecured debt problems.
How to Qualify for Credit Card Debt Bankruptcy
Although chapter 7 is an effective way to get rid of credit card debt, not everyone will qualify for this debt free solution. People who have filed within the last eight years will not be eligible under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. The other eligibility criteria can potentially involve complex and involved calculations, but there is a basic requirement that the debtor’s income should be below the median for the state they live in. Free help for credit card debt should be sought from a bankruptcy attorney or credit counseling service.
Non-Exempt Assets, Bankruptcy and Credit Card Debt Elimination
Non-exempt assets, such as a valuable and rare collection, second home or a sports car, cannot be excluded from the agreement. These assets will need to be handed to a court-appointed trustee. They will then be sold and the proceeds disseminated to creditors on a pro rata basis. A families primary residence will normally be alright, provided its value isn’t too great. If not eligible for this credit card debt solution, filing chapter 13 bankruptcy or debt settlement program could provide the answer. There are a number of ways to get rid of credit card debt so it’s important to get proper advice from a professional before proceeding.
How Credit Card Bankruptcy Affects Credit Scores
Eliminating unsecured credit card debt under chapter 7 will show on a personal credit report for a period of not less than 10 years. According to Liz Pulliam-Weston of MSN Money, declaring bankruptcy will lead to a 680 credit score falling by as much as 130 to 150 points. Although there are steps that can be taken to get a better credit score, it will normally take a minimum of two to three years before that person will become eligible for a mortgage. Bad credit car loans, a payday cash advance and federal student loans will still be available.