Know the Facts About Declaring Bankruptcy – Chapter 7

Together with changes in mortgage terms and the seemingly out of control housing market in many parts of the United States, many people are feeling a bit over their heads. Quite a few homeowners are taking the drastic step of declaring bankruptcy. But many homeowners “jump in” without learning what procedures are involved and the lingering effects of declaring bankruptcy. Don’t wait until it is too late–educate yourself before making any decisions. In many cases, declaring bankruptcy makes financial sense, but the decision should never be made without considering all of the consequences.Will I Lose My Home?Whether it is divorce, job loss, serious medical expenses, or any other drastic event, homeowners declaring bankruptcy have typically run into unexpected financial trouble. It is important for these desperate homeowners to know that petitioning for Chapter 7 bankruptcy does not necessarily mean the loss of property. Instead, with an agreement decided by a judge, the lender and yourself (the debtor), some debts can be reaffirmed. This means that as long as you continue to make payments, you will retain the rights to the property involved in those debts. After all, the lender does not want to foreclose. They would rather that you make payments.However, inability to make payments for the property might have been the original financial hardship in the first place. In this case, it is better to sell the property or include it in your bankruptcy agreement. It is very important that you discuss these issues with a qualified attorney or bankruptcy expert to determine if this is the best decision for your circumstances.Informed Real Estate Owners Know the Facts about Chapter 7Chapter 7 bankruptcy petitioning involves the discharging of some or many of an individual’s or a couple’s debts. Medical debts, credit card debt for consumables or other services that do not involve an asset, are common debts Chapter 7 bankruptcy petitioners look to have discharged. But it is important to know that not all debts are removed in these proceedings, and in fact, some cannot be. The government does not allow consumers to discharge alimony or child support, or many other court-ordered obligations such as criminal reparations. You will still be liable for debts owed to the US Government, such as government-backed student loans or Internal Revenue Service (IRS) debts.Declaring Chapter 7 bankruptcy will continue to affect credit scores for seven years after the discharge. During the seven-year time period, getting a low-interest rate mortgage will be difficult. You are a high-risk debtor and should expect to work hard and be disciplined as you work toward repairing your credit history.There are Multiple Steps to Declaring Chapter 7 BankruptcyIn the past few years, Congress has passed laws making it a bit more difficult for people to petition for bankruptcy. These new laws require you to get financial counseling of some type no less than six months before you are eligible to file. And, in order to be eligible for bankruptcy, the applicant must pass the Means Test, a procedure that measures the debtor’s income to debtor’s state median income. To be eligible for bankruptcy, your income must be below 150 percent of the state poverty level. However, not meeting the requirements of the Means Test doesn’t prohibit a debtor from filing other types of bankruptcy.

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