Bankruptcy deals with debts in a way no other debt relief option does. By debt relief, we mean a process that helps to pay off debts. That could be anything out of, Debt Consolidation, Debt Settlement, Credit Card Balance Transfer, or for instance, Bankruptcy.
In this blog post, we will be revisiting Bankruptcy. We feel like people want to know more about Bankruptcy in an easier approach! We aim to satisfy you with quality content and clear water information.
Bankruptcy gives you shelter from the cold threats and hot actions of creditors and collectors. It forgives most of your debts, at times all! And, it gives you a new meaning to your life, if taken positively. Many famous people have filed for bankruptcy in the history of our nation. Examples are big music bands, important political figures, Hollywood stars, and many more! Will Smith did it, Abraham Lincoln did it, Marvin Gaye went through it…… even did Mike Tyson.
In most cases, bankruptcy seems to work out in unexpected ways. It is noted that people start to change after filing for bankruptcy! Their financial habits change, their lifestyles change, and most astonishingly their social health changes.
Here, we will cover 3 important aspects of Bankruptcy:
- How Bankruptcy treats your debts. A breakdown of Chapters 7 and 13.
- Impact of Bankruptcy on your life, and a new beginning.
- How bankruptcy affects your social health.
2 Different chapters of bankruptcy and their own individualistic treatment of debts!
The biggest fear people have when they think of bankruptcy is that they are going to lose everything to the court and creditors in the process. By everything we definitely mean money, houses, cars, personal properties, and any other asset the filer has. But, it’s actually not so!
Bankruptcy has been introduced into the law system to make us realize our financial mistakes and help us lead a better life afterward!
Here’s what Chapter 7 does:
Firstly, this specific debt relief option, i.e a chapter 7 bankruptcy, is very aggressive and straightforward. The aim is to clear your debt mess once and for all. And, if you are filing this chapter, then you need to know that it has the power to liquidate all your assets and sell them off to compensate for your debts.
Chapter 7 has got the reputation of liquidation bankruptcy. However, you can still keep some of your assets as part of the exemption. Usually, you get to keep some of the equities on your assets depending on the exemption limit set by either the State or the Federal Government.
Some states might allow you to choose between either Federal Exemptions or State Exemptions, while others will only let you take State Exemptions. If you get the choice, then choose the one that lets you exempt or keep most of your properties!
It’s not quite possible to read out all the exemptions out here. For states, exemptions read Nolo’s article, and for federal exemptions read the Bankrate’s article. They have explained it better and we believe no further explanation is needed.
Chapter 7 bankruptcy wipes out your debts by nearly forgiving most of the unsecured debts, but child support and alimony are exceptions! On the other hand, tax debts are highly misbehaved and they might hold on to your back, even after filing for bankruptcy. They are not easily discharged! Plus, if IRS has imposed any form of a tax lien on any asset before the bankruptcy filing, then you might also not be able to sell off that asset in bankruptcy!
Student loans are the toughest form of debt to be discharged in bankruptcy. You will have to show the court that making payments for the student loan will become an excessive financial burden or hardship.
And, that’s what Chapter 7 is talking about.
Here’s what Chapter 13 does:
Beautifully crafted, it’s easier to qualify for Chapter 13 than for Chapter 7. Chapter 13 is also called reorganization bankruptcy, one that gives you time to manage debts over a spread out a payment plan!
But, unlike Chapter 7 we won’t be selling off or liquidating assets, as we don’t need to! A debt repayment plan will be laid down and you will be paying off debts for a longer duration with systematic payments.
In Chapter 13 (also in Chapter 7… remembered to mention), an automatic stay will be imposed on you that will bar all creditors and collectors from making any attempt to collect debts from you. However, secured debts might behave some other way, and a secured debtor can file a motion of relief to lift your automatic stay! Any other creditor can also do the same thing but the norms for filing such a motion are not easy to meet!
Discuss with an advocate about automatic stay and motion of relief, to understand the concepts in more detail. Chapter 13 Bankruptcy, however, may or may not forgive your debts, which depends on their level of priority. But you can expect to see some of your low priority unsecured debts getting forgiven if you can show some type of hardship in making their payments!
Either way, both in Chapter 7 and Chapter 13, the secured debts have no chance of forgiving! In fact, if you can’t carry on with payments based on the repayment plan given in chapter 13, then there will be a chance of foreclosure! But, here’s one tip: Always try to file a no-asset bankruptcy (do your own research), if going for Chapter 7!!! In Chapter 13 however, try to carry on with your secured debt payments as per the repayment plan to keep your property.
But, whatever it is, you can only keep your property if you can make the payments. Be it even bankruptcy.
Effects of Bankruptcy on your ‘Social Health And Life’, and how you should respond to the new call:
If you are planning to file for bankruptcy, then you must take it seriously, for it’s about to get a serious grip on you. Bankruptcy is not just a financial term, that’s only expressed in numbers and dollars. It’s a deep event, that has a deep impact on your life.
Bankruptcy will change your life. It’s like a new beginning that will help you to realize things that you never quite understood before. It’s the depression I am speaking mate. It’s the ‘Significant Low’ that comes after the fuming ‘High Life’, you have led.
One wise person told me, to have fun, to the limit I wanted to! And then, when I realize the mistakes, I should not repeat them. You can keep on making mistakes till you yourself realize them. And, bankruptcy exactly does that. It makes you realize your financial mistakes, it makes you understand your status, it makes you understand your ground, and most importantly it teaches you some big lessons. Try to take the Bankruptcy Depression positively.
But things might not be that easy either. Bankruptcy affects your social health! People around you will start to behave and act differently. You will definitely notice them, for those changes will be highly noticeable.
- Bankruptcy might promise you a new life, financially.
- It will get rid of your debts and will make you debt-free.
- But, it does not guarantee you a happy social life.
However, you can always make things go your way if you are ready to accept changes and can be positive! There are so many people who benefited from bankruptcy. Slowly and steadily they tried out new sources of income. Got more money coming in. Started to practice new money habits. Planned on investments and made nice wealth overtime.
You can also do the same. There’s absolutely no reason to withdraw yourself from social activities if your own people start to isolate you. Time will give you options. There’s nothing to be shy, ashamed, or guilty conscious, just because you went bankrupt. It is for the help and benefit of the general people, do our law has bankruptcy in it.
It’s good that you have realized, and are ready to rectify your money habits. It’s a good sign! It means you are human, and therefore comprehending ethics! Even if you feel, that you want to avoid bankruptcy, then I would say, you should choose debt consolidation or debt settlement. They are far easier to go with, with no social health injuries attached!
For more details on your case, please talk to a nearby advocate, or join online forums to discuss with other people, who are going through the same problems.
Some good online finance forum discussions can be found at:
Also, you can start a discussion on Stack Exchange or Quora!