Should I File for Bankruptcy?

Should I File for Bankruptcy?

Bankruptcy eliminates your debts


If you are considering filing for bankruptcy, you should first take a look at the amount of your unsecured debts including, but not limited to:

  • Credit Card Debt
  • Medical Bills
  • Past Due Utilities
  • Vehicle Repossession Deficiencies
  • Negative Bank Balances
  • Money Judgments


Chapter 7 is the most common and straightforward type of bankruptcy, and it eliminates these unsecured debts. If you are behind on your mortgage payments, and you cannot afford to keep your house anymore, a Chapter 7 bankruptcy will eliminate any mortgage deficiency you would owe after the house is foreclosed and sold by the mortgage lender, thus getting you out from under a burdensome mortgage that you cannot afford.


Can I keep my property and possessions in a bankruptcy?


Your ordinary possessions are likely exempted and protected. The law allows you to, in most circumstances, exempt the following:

  • Automobiles
  • House
  • Household Goods & Furnishings
  • Electronics
  • Clothing
  • Tools
  • Jewelry
  • Appliances
  • Other common household goods


However, luxury items like airplanes and yachts probably will not be protected.


You will need to decide if you need relief from secured debts such as overdue car loans and mortgages. Although your house and vehicles may be exempted, you may prefer to get rid of them if payments are overdue and you cannot afford to keep them anymore. If you are behind on car loan payments, you can surrender the car and get rid of the loan debt. If you want to keep your car, just keep making your car payments.


Will bankruptcy hurt my credit report?


You may be reluctant to file for bankruptcy because you worry about what it does do to your credit report. But consider that if your finances are in the condition that you need to file for bankruptcy, your credit report is probably already damaged by all the debts you may already owe. Bankruptcy can actually improve your credit in the long run.


Consider the purpose of a credit report and why it’s important to maintain a good credit report. Potential lenders look at your credit report to determine whether you are a good credit risk. Lenders want to know that you will be able to afford the payments to pay back the money if they grant you a loan, such as a car loan, mortgage, or credit card. If you are in the situation where you need to file for bankruptcy, you probably cannot afford to pay off the debts you already have and cannot take on more debt. Potential lenders can determine this from looking at your credit report, and they likely will not grant you a loan if you owe too much debt already.


Bankruptcy can improve your credit. When lenders see too many debts on your credit report, they might not want to give you a loan if they think you will file for bankruptcy to avoid paying back the loan. However, if a lender sees a Chapter 7 bankruptcy on your credit report, they are aware that you cannot file a Chapter 7 bankruptcy again for the next eight years. Therefore, they may believe you would be a better credit risk than someone stacked with an unmanageable debt load.


After filing for Chapter 7 bankruptcy, you will get a fresh start to obtain good credit if you can make your loan payments on time for any new debts, and loans should have the opportunity to rebuild your credit score when your credit report shows potential lenders that you would be a good credit risk.


Filing your Chapter 7 Bankruptcy Petition


A bankruptcy lawyer can correctly prepare and timely file your Chapter 7 Petition and Schedules with the Bankruptcy Court. Immediately, you will receive an Automatic Stay that means all collection actions against you must stop, including foreclosures, repossessions, wage garnishments, court judgments, and even harassment from debt collectors. Your bankruptcy lawyer can also reassure you before your case is filed whether your possessions and property are exempt and protected.


Attending the 341 Meeting of Creditors


After your case is filed, you will attend the 341 Meeting of Creditors. During this meeting, the Bankruptcy Trustee will question you about your Petition and Schedules that were filed with the Bankruptcy Court. Your creditors are permitted to attend the meeting and question you about the debts you owe. If you hired a lawyer to file your bankruptcy case, your lawyer will attend this meeting with you to make sure your rights are protected.


Non-Dischargeable Debt


Some types of debts are non-dischargeable in a Chapter 7 bankruptcy, meaning that you will still owe them after you receive your bankruptcy discharge. These include, but are not limited to:

  • Student Loans
  • Taxes
  • Government Fines
  • Child Support
  • Alimony

 Although these debts are not eliminated by a Chapter 7 bankruptcy, after you receive your discharge that does eliminate your other debts, you may be in a better position to afford paying off your non-dischargeable debts.


Receiving your Chapter 7 Bankruptcy Discharge


Soon after you attend the 341 Meeting of Creditors, the final step is to Receive your Discharge. You receive this in the mail automatically. This means your Chapter 7 is complete, and you no longer owe the unsecured debts and the secured debts that you chose to surrender.


After you get Chapter 7 bankruptcy discharge, which is when your bankruptcy case is approved, your credit report will demonstrate that your unsecured debts are gone. Lenders can see that you don’t owe any debt on credit cards, medical bills, negative bank balances, or other unsecured debts. Consequently, lenders can see that you could actually afford to make the payments on a new loan, and lenders may be more likely to give you a loan since you would be free of unsecured debts after your Chapter 7 bankruptcy discharge.


Contact a Bankruptcy Attorney to file your Bankruptcy case


If you need debt relief or have questions about Chapter 7 bankruptcy relief, contact us at Starks Law P.C. for a free consultation with an attorney. We listen to the needs and goals of every client and create a legal strategy tailored to that person and their case. We do not believe in the 'one size fits all' legal strategy employed by other firms. Every case is unique, and we plan accordingly.


Representation from Starks Law begins with a simple phone call. We will review the circumstances surrounding your unique situation. After assessing the details, we will form an action plan tailored specifically for your case and goals. Additionally, we will do our best to answer any questions you may have so that you can make a fully informed decision on how to proceed. Take advantage of Chapter 7 bankruptcy debt relief to regain your financial freedom.