3 Things You Need To Know About Filing For Chapter 7 Bankruptcy
It can be easy to get yourself into financial trouble these days. Between loans and massive credit card debt, so many people are finding it necessary to file for Chapter 7 bankruptcy in order to get their finances back on track. However, this is not a decision that should be made without some careful thought. Here are three things you need to know about filing for Chapter 7 bankruptcy.
1. You will have to complete credit counseling before you can file.
One of the better changes made to the U.S. law regarding bankruptcy filings in 2005 was the addition of the credit counseling requirement. Now, anyone wishing to file for bankruptcy has to go through credit counseling before they can file. The credit counselor must be approved by the U.S. Trustee's office and you must complete the counseling within the six months prior to filing.
The purpose of the credit counseling is to see if you can avoid filing for bankruptcy. The counselor will look at your bills and your income and see if there is a feasible way for you to pay off your debt. Of course, even if they do find a way, you don't have to go along with their plan. You just need to be prepared to explain to the bankruptcy court why you disagreed with the credit counselor's plan for repayment.
In addition to the credit counseling before filing, you will have to attend debtor education after you file. In debtor education, you will learn about using credit responsibly, developing a budget, and managing your money more wisely. This must be completed before your debts will be charged off in bankruptcy court.
2. Not all debts can be discharged in bankruptcy.
Something that so many people get wrong about bankruptcy is that everyone is guaranteed to get rid of all their debts. This is not true. For instance, if you are paying your car payment and you want to keep your car, you will need to keep that debt off of your bankruptcy schedule and continue making those payments.
However, you can't get rid of certain debts even if you want to. Some of the debts that you can't discharge in Chapter 7 bankruptcy include:
- Alimony/spousal support
- Child support
- Recent tax debt
- Judgments or settlements for personal injury cases
- Student loans (unless you can prove a significant hardship if you repay them)
- Debts incurred through fraudulent means
- Government fines
Of course, that list isn't exhaustive. Your bankruptcy attorney can help you determine which of your debts you can discharge and which ones you can't.
3. Bankruptcy follows you around for up to 10 years.
The biggest issue with filing for Chapter 7 bankruptcy is that it can stay on your credit report for up to 10 years. Sometimes it may fall off after seven years, but you need to be prepared for it to follow you around for a decade. That means filing for bankruptcy can hurt your chances of getting a new car, a mortgage, or even a small, personal loan.
If you are fortunate enough to get a loan or a credit card before your bankruptcy falls off of your credit report, please use it wisely. Doing so can help you rebuild your credit so you will have a very good credit score once the bankruptcy does come off. Contact a lawyer who specializes in bankruptcy, like one from FactorLaw, for assistance.
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