If you are confused about whether Chapter 7 is appropriate for you or not, the solution can be found right here. By finding answers to the following questions, you can determine if Chapter 7 is the right choice for you or not. To know more about other benefits and alternatives to Chapter 7 log on to Recovery Law Group.
- Are you ‘Judgement proof’?
This is the first question that will determine the threat of your lenders or creditors. ‘Judgement proof’ is the term used to determine the degree of impact a Chapter 7 judgment could make on your financial position. If your lenders and creditors can legally access your cash, assets, or any other property, you should definitely consider Chapter 7. If they aren’t able to access your assets before and after Chapter 7, you are referred to as ‘judgment proof’.
When the debtor is ‘judgment proof’ the lender usually approaches the court for a lawsuit proceeding. This is true for most of the unsecured lenders. If you think you are going to be held liable in the lawsuit, it is better to apply for Chapter 7 bankruptcy to release all unsecured debts (under most circumstances) to prevent further action.
- Is Chapter 7 discharged debt enough for your financial situation?
There are basically two types of debts one is non-dischargeable debts and the other type is dischargeable. There are some debts which cannot be released even during bankruptcy. These types of debts are classified as non-dischargeable debt. These can be listed as follows-
- Child support and alimony payments
- Student loan payments
- Income tax dues from three recent years
- Debts relating to any luxury spends
- Fines, penalties, arising from lawsuit, accident injury payments, drinking & driving cases, arising from Court judgments
In certain situations, some debts which are otherwise dischargeable can be subjected to a full repayment by the bankruptcy court. These debts can be listed as follows-
- Any debt incurred by providing for incorrect information or by writing a bad check, which is otherwise referred to as fraud
- If there are debts that have been caused due to willful destruction of other’s property or a malicious injury, such debts will be judged as non-dischargeable
- Debts developed from theft, embezzlement and/or breach of trust
- Debts mentioned in the form of a marital settlement agreement, which could otherwise be discharged.
If a large chunk of your debts is in the above categories, you would not want to consider Chapter 7.
Determining the assets, you will have to give up under Chapter 7?
The assets are classified under two categories exempt and non-exempt for Chapter 7 bankruptcy. Under most states, there are certain exempt properties, which you can safeguard even when you file for Chapter 7. The list goes as follows-
- Automobiles up to a specific value, the value varies from state to state but certainly does not allow for a luxury vehicle though
- Clothing, which is extremely essential
- Reasonable household stuff
- Household appliances
- Jewelry up to a specific value
- Personal assets
- Wedding ring
- Proceeds or cash value or any loan value of life insurance up to a certain value
- Pensions
- A portion of the equity in your home
- Tools required for job/profession or business up to a specified value
- Part of unpaid yet earned wages
- Public benefits which blanked social security, unemployment comp, etc.
After assessing the stuff, you can save, let’s list the assets, which fall under the category of non-exempt assets. These assets under most circumstances will have to liquidated to pay off the arrears. In order to resist the sell-off of these assets, one has to pay the debt in full. Non-exempt assets can be listed as follows-
- Musical instruments, which are expensive in nature. This can be exempted for professional musicians.
- Collections of coin, stamps, or others with significant value
- Investments like stock, bonds, and liquid assets like cash, bank accounts, etc.
- A second car or an automobile as only one automobile is exempt and the second one will be attached for liquidation
- Second home or vacation home if any will be attached too
Will your case be an asset case or a non-asset case?
The understanding of an asset or non-asset case is very simple. If your case involves liquidation of an asset, then it is regarded as the asset case. If your case does not have any non-exempt assets and the bankruptcy trustee has no assets to sell to recover the debt, then it is regarded as a no-asset case. It is happy to note that more than 80% of Chapter 7 cases are no-asset cases. This is primarily because most people would have already turned in all their non-essential assets before applying for bankruptcy to repay as much as they can.
Under certain circumstances, applying for Chapter 7 bankruptcy and losing a lesser value asset for a significant rebate in total debt owed. For instance, if you own an asset worth $30,000 and owe $50,000 towards child support and alimony and $40,000 towards a credit card bill. The asset worth $30,000 will reduce your debt towards child support and alimony to $20,000 and release your credit card debt completely provided you do not have any other non-exempt asset.
What about your cosigned debt?
A cosigner acts as a guarantor who is liable to pay off debts if the debtor fails to repay or defaults. Applying for bankruptcy can create a troublesome circumstance for the cosigner. The cosigner remains liable for the whole debt even after you file for Chapter 7 bankruptcy. The credit score of the cosigner also is affected if the debtor defaults or applies for a Chapter 7 bankruptcy Dallas. Basically, the liability has shifted from the debtor to the cosigner in the event of Chapter 7, which is not a desirable scenario for sure. To know more about the tricky aspects of bankruptcy, cosigner, Chapters, etc., from the experienced, qualified professionals dial 888-297-6203 right now!