Bankruptcy can help you become free of debts but it isn't the right option for everyone. It's important to understand how it will affect your day-to-day life and to explore the alternatives. There isn't a minimum amount of debt you need to be eligible.
If your unsecured debts total more than the things of value you own, then bankruptcy is an option for you. Unsecured debts include things like credit cards, personal loans and store cards. If you go bankrupt any EU pension pots could be taken by the official receiver to pay debts. If this affects you get financial advice. The official receiver has the power to investigate your financial behaviour before and after your bankruptcy order is made. Or if they think you've committed a 'bankruptcy offence', you could be fined or sent to prison.
Before you consider bankruptcy, check what counts as a bankruptcy offence. If you're considering bankruptcy, you'll need expert advice. Contact your nearest Citizens Advice for advice about your debt problems and bankruptcy.
Bankruptcy might not be right for you if you owe money to people or businesses in the EU. These debts might not be covered by bankruptcy. Your creditors could keep asking you for money, for example by calling you and sending you letters. If you live in the EU, they could take you to court in the EU. If you own a property in the EU, creditors with debt secured on the property, for example a mortgage lender, could take action in the EU.
EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. Get legal advice if you have creditors in the EU. If you file for Chapter 7, you might lose your car if you have substantial equity that isn't protected by your state's exemption laws.
To learn more, see our Bankruptcy Exemptions area. Bankruptcy is good at wiping out most credit card debt and unsecured loans, unless you spent extravagantly or lied on your credit application. In most states, you will not lose pensions,retirement accounts, or life insurance in bankruptcy.
If you have a pension, a k , an IRA, or life insurance, find out what's protected in your state. To learn more, see Your Retirement Plan in Bankruptcy. If a friend or relative helped you get financing by cosigning a loan agreement, Chapter 13 bankruptcy will protect your cosigner, but Chapter 7 will stick them with any debt you don't pay.
Bankruptcy can be intrusive -- you have to disclose every last detail of your finances to the court, and other people may find out about your bankruptcy. In a Chapter 7 bankruptcy, you can have property taken away, or, under a Chapter 13 plan, you might spend three to five years having to ask permission to spend your own money. Bankruptcy will also have a detrimental effect on your credit score.
The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. This article explores the pros and cons of filing Chapter 7 bankruptcy. Filing bankruptcy triggers an automatic stay - or stop - on all collection actions. This means all phone calls, garnishments , and collection letters have to stop.
It even put at least a temporary stop to repossessions, evictions, and foreclosures. Filing Chapter 7 bankruptcy wipes out most types of debt, including credit card debt, medical bills, and personal loans. Your obligation to pay these types of unsecured debt is eliminated when the bankruptcy court grants you a bankruptcy discharge.
The clean slate you get when your bankruptcy discharge is granted is your chance to rebuild your credit and increase your credit score. Most people have a higher credit score 1 year after filing Chapter 7 than on the day they began the bankruptcy process. Not only will this help you rebuild your credit and increase your credit score, but it will also give you access to the safety net that comes with having a credit card in case of an emergency.
Filing a Chapter 7 bankruptcy is not right for everyone. And even if it feels like the best debt relief option for you, it may not be once you consider some of the cons of Chapter 7. This is about folks who have money they can put into savings after paying their main living expenses. Those that are able to maintain their monthly payments and keep their credit score high before filing their bankruptcy petition will see their score drop initially.
Plus, once their bankruptcy discharge is granted, they can begin increasing that pesky credit score immediately. Some unsecured debts, like alimony or child support can never be discharged in bankruptcy.
Other things, like tax debts and student loans can be quite hard to eliminate by filing bankruptcy. One of the trade-offs for getting a bankruptcy discharge in a matter of a few months is the requirement to give up certain expensive items.
Nonexempt property - the type of property the bankruptcy trustee can sell to pay creditors in a Chapter 7 bankruptcy case - is pretty rare. A bankruptcy filing under Chapter 7 eliminates only your obligation to pay the debt. They may be nothing more than scam artists. If you owe money to the IRS, you may be eligible for an offer in compromise , allowing you to settle with the agency for an amount less than you owe. Bankruptcy law exists to help people who have taken on an unmanageable amount of debt—often as a result of large medical bills or other unexpected expenses that are no fault of their own—to make a fresh start.
So before filing for bankruptcy, be sure to explore all your alternatives and be prepared for some of the negative consequences described above. If you decide that bankruptcy is your only viable option—as hundreds of thousands of Americans do every year—remember that the blot on your record will not be permanent.
By using credit carefully in the future and paying your bills on time, you can begin to rebuild your credit and gradually put bankruptcy behind you. Debt Management. Student Loans.
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