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Pros And Cons Of Bankruptcy
We help you weigh the pros and cons of filing bankruptcy so you can decide if it’s the right choice for your situation.
The Pros And Cons Of Filing Bankruptcy
Declaring bankruptcy is a very scary open option. But you may be surprised to learn that the pros of bankruptcy often outweigh the cons. Personal failure can give you the clean slate you need to start over. It’s often the best way to quickly move on from a problem.
Whether you file for Chapter 7 or Chapter 13, there are some definite benefits to filing for personal bankruptcy.
When you declare bankruptcy. It automatically starts live. That is, creditors Lenders and (at best) collectors cannot contact you. Once you post, they can’t try to call you to harass you. If they do, you can fight back and get compensation.
Automatic occupancy can delay storage and retrieval operations. Lenders cannot move to take your home or other assets while the automatic stay is in effect while you are going through the application process.
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Failure won’t take your clothes off. While courts can liquidate assets during Chapter 7, your home and car may also be exempt from liquidation. So even by filing Chapter 7, you can retain more assets than you expected.
In the end, you will not be burdened with everything you have to repay. You won’t have the weight of impending financial ruin on your shoulders. You will not be required to pay the lion’s share even if you have not been discharged (on the following points).
“Chapter 7 bankruptcy is often the least expensive and quickest option,” explains Steve Rhode. “Keep your retirement savings when you need them”
Basically, Chapter 7 gives you a way to stop the hemorrhaging of payments. This frees up the money you have set aside so you can start saving for retirement. It’s important.
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As he explains, “If a 25-year-old or so decides to participate in credit counseling or a payment plan, they will pay it off. But that plan will cost them $23,231.12 in retirement funds that would be worth $1,247,526.55 when they finally go retired .”
This means that delaying your failure and trying to fight it using other methods will hurt you in the long run. You are better off filing Chapter 7 moving forward instead of continuing to treat the water.
Chapter 13 can take a few years to complete, but there are still benefits to filing. This is especially true if your creditors and debt collectors are unwilling to play games with your payments.
With a Chapter 13 bankruptcy; The court trustee establishes a repayment plan in which a portion of what is owed to each creditor is repaid. The process is very similar to a liquidation plan. At best, you want to maintain control over the negotiations and not let the courts have the final say. Only the people you want to negotiate with are right.
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In some cases, collectors may be too greedy to make this a viable option. For example, some collectors may try to reduce the amount of debt by charging interest rates. So it would be best to leave the matter to the court. The court will decide whether the additional expenses comply with the terms of the original agreement. If not, they will tell you to remove the additional charges.
If you don’t have enough assets to qualify for exemptions in your state, Chapter 7 is usually better than Chapter 13. It’s faster, easier, and gives you the cleanup you want. I have a feeling it will finally come out this year instead of a few years later.
Steve says most people who file Chapter 7 rarely lose their assets entirely. They have no assets to liquidate or their assets fall below the value that qualifies for an exemption in their state.
That said, not everyone qualifies for Chapter 7. When you file bankruptcy, you must pass an income test. Compare your income to the average poverty income level in your state. If your income is too high, you may not be allowed to file for Chapter 7. In this case, you will be forced to file Chapter 13 instead.
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If you need professional advice on whether it’s time to file. Speak to a certified credit counselor for a free assessment and budget; Only then can you change your options.
However, failure can lead you in a positive direction. That’s not to say it isn’t without its downsides. However, our expert claims that most of these vulnerabilities are not as serious as they seem at first glance.
Filing for bankruptcy creates a negative note on your credit report. For Chapter 13, A negative entry lasts 7 years from the filing date. It extends up to 10 years from the date of filing for Chapter 7.
But that doesn’t mean you have to put your financial life on hold for a decade. In fact, you will recover much faster than you expect. The “weight” of negative credit report items on your credit score decreases over time. Therefore, the more you distance yourself from the bad thing that happened. The less impact it has. Negative aspects of the past can be offset by positive actions moving forward. Then you can take steps to repair the damage and rebuild your credit.
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Rhode also said the credit damage caused by bankruptcy is many times less than if consumers were to find themselves in financial difficulty if they didn’t file. The proof comes from a study conducted by the New York Federal Reserve in 2015. Especially if you get the problems wrong and try to solve them yourself. If you get bitten, you will lose more credit points than you will earn. Bullet and files.
There are some people who cannot get discharge, such as child support or alimony. Depending on the type of tax and your situation, the tax may not be easily collected.
There is also a misconception that student loans cannot be granted even if they are private. But our expert disagrees.
“Some federal student loans and many other private student loans can be discharged through bankruptcy,” Rhode said. “But many people believe the myth and don’t try. In fact, Why are trade or professional programs not eligible for Title IV; Most private student loans are not protected in bankruptcy.”
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The reason for this myth is that the federal government provides some protections for student borrowers during consumer bankruptcy filings. The idea is that the government has no intention of repaying the students, so they don’t want to get elected. As long as the supported education is eligible for Title IV, federal loans are protected as are private loans.
But this leaves a huge loophole where lenders would prefer unknown lenders. In other words, there is no harm in trying to pay off your student loans. Although the education is eligible under Title IV; In cases of extreme financial difficulty, disinvestment is still possible. So it’s worth asking to at least vent.
The whole idea of bankruptcy is that you will become a debtor. You will be blacklisted and traditional lenders will stay away. But most of these fears have their roots in myth.
In other words, there are ways to settle down while you work to rebuild your credit and regain good credit. You can still buy a car. You can prepare for a mortgage in no time. If you need credit cards; If you are not eligible for secured cards, you can use secured credit cards.
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Rhode explains that it is often easier to obtain credit after filing for Chapter 7. “Chapter 7 filers are more likely to obtain unsecured credit from new lenders than Chapter 13 filers. The resurgence of new credit cards could be slower for Chapter 13 filers; Because they are using some of their income to pay off the old ones, and they can go bankrupt again faster than Chapter 7 filers can.”
Co-signers and guarantors who discharge themselves in personal bankruptcy are not protected from collection. AS,
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