Finding yourself with more debt than you could ever repay is much easier than many people realize. In fact, something as simple as a prolonged illness can send many people spiraling into a black hole of debt before they even realize just how bad things have really gotten. Thankfully, there are options available that can help you to overcome virtually any amount of debt. One of these options is filing for Chapter 7 bankruptcy. For many people, this is the most beneficial option available, since filing for bankruptcy will allow them to actually eliminate a large portion of their debt without the need to repay it. However, before you run to your local courthouse to file a bankruptcy petition, there are a few facts that you should know.
Fact: Only Unsecured Debts Can Be Discharged
Most people have two kinds of debt, secured and unsecured debt. Secured debt is any debt that is obtain through the use of real property or collateral. For instance, when you take out a mortgage loan, you use the house that you are buying as collateral in order to secure this loan. If you fail to repay your mortgage, the lender will have the right to foreclose on the property in order to try and recoup their losses. Currently, bankruptcy laws do not allow for the discharge of these debts, since the lender still maintains the right to foreclose or repossess the collateral used to secure the debt.
Unsecured debts on the other hand, are debts that did not require collateral to obtain. For example, you are not asked to provide any collateral when receiving a new credit card in the mail. Instead, you are simply told that by using the card, you are agreeing to the terms of service that come with that card. Therefore, your credit card bills will be considered unsecured debt and can be discharged as part of a bankruptcy settlement.
Fact: Your Assets Will Be Limited
Bankruptcy laws exist not only to protect debtors, but to protect creditors as well. This is because without the presence of a bankruptcy system, some creditors would never see payment on outstanding debts. Bankruptcy laws try to prevent this from happening by offering debtors the right to discharge a portion of their debt in exchange for their assets being limited. This is done through the use of bankruptcy exemption laws that dictate what type of assets you are allowed to maintain and how much these assets can be worth while you are in bankruptcy. For example, the homestead exemption will allow you to maintain a primary residence that does not exceed a certain value. This value will vary from state to state depending on the state's exemption laws.
If you currently have any assets that are not protected by the exemption laws in your state, these assets will be seized and sold as part of your bankruptcy case. Any proceeds that are collected from these sales will be split amongst your creditors in order to repay as much of your debt as possible before discharging the remainder of this debt.
A Final Thought
Whether you believe that Chapter 7 bankruptcy is right for you or not, you should always take the time to consult with a bankruptcy attorney when considering debt relief solutions. This is because, not only can these attorneys help you through the process of filing for bankruptcy, but they can also help you to identify and utilize alternatives to bankruptcy if these alternatives better suit your needs.
For more information, contact an experienced lawyer from a firm like Wagner Law Office PC.Share