The state of a person's finances can be a source of frustration. So often people find themselves in financial binds and they have to turn to maxing out credit cards and taking out massive loans to get them through the crisis. Unfortunately, that means they end up with a tremendous debt that they have no ability to repay. Whenever you find yourself in this situation, there can be a way out by filing for Chapter 7 bankruptcy. Here are three things you need to know about doing that.
1. It may not wipe out all of your debt
One of the benefits of filing for Chapter 7 bankruptcy is that it allows you to wipe out your debt without paying it back. However, not all types of debt are eligible to be discharged in bankruptcy court. The types of debts that you can get rid of in Chapter 7 bankruptcy include:
- Credit cards
- Past due amounts on your utility bills
- Bounced checks (non-fraudulent)
- Any accounts sent to collection
- Medical bills
- Money due for leases
That is just a sample of the types of debts that can be wiped out with a Chapter 7 bankruptcy. Some examples of debts that you can't get rid of in bankruptcy court are:
- Student loans (in most cases)
- Child support
- Fines and fees to the government
- Lawsuit settlements
- Fraudulent debts
- Debts not scheduled on the bankruptcy
2. The bankruptcy will stay on your credit report for up to 10 years
While filing for Chapter 7 bankruptcy can help put your mind at ease since you won't have that large pile of debt looming over your head anymore, it doesn't come without its negatives. One such negative is the fact that it can stay on your credit report for up to 10 years.
What does that mean for you? Well, that means you can find it extremely difficult to get a home or car loan. You will likely also have higher deposits to pay on establishing new services that require deposits, such as utilities and cell phones.
On the flip side, some people can find it easier to get credit cards and some loans after a Chapter 7 bankruptcy because the creditor knows that you will have to wait at least eight years before you can file for it again.
3. Your creditors can fight your bankruptcy in court
One thing that many don't realize is that creditors can actually fight your bankruptcy discharge in court. For instance, if you are trying to get a loan from a friend or family member discharged in bankruptcy court, they can hire an attorney and fight the discharge. If they can prove why you should be required to pay back that debt, then a judge may not allow the debt to be included in your bankruptcy discharge.
If you have specific questions about filing for bankruptcy, contact a lawyer with a firm like Morrison & Murff.