Getting a Fresh Start
Chapter 7 bankruptcy filings are the most common for individuals in the United States. Chapter 7 bankruptcy allows the debtor (the individual filing) complete liquidation of any owned property in order to pay back the unsecured debts that are owed to creditors.
While filing for bankruptcy will pay off all or most of your debts owed, it will leave quite a sour mark on your credit reports and Chapter 7 bankruptcies specifically, will stay on your credit reports for up to 10 years.
After filing for Chapter 7 bankruptcy, you will be required to seek credit counseling as well as a course in debtor education.
There are a few debts that can survive Chapter 7 bankruptcy filings, including mortgages and car payments. Meaning that while you will not have to sell your house, there is a good chance it will be foreclosed on. Now, when it comes to student loans, if a debtor can prove extreme hardship the loan(s) may be discharged upon filing Chapter 7 bankruptcy, however, it is often very difficult to prove such.
Filing for Chapter 7 bankruptcy is limited to an extent. In 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act in order to keep those who are able to pay off their debts from filing for Chapter 7 bankruptcy. This is determined by what is known as the “means test”, which shows if the consumer is in sufficient enough debt to file for asset liquidation. The “means test” is conducted by comparing the consumer’s current income to the average income of the state in which they reside; if the consumer’s income is higher than the state average further means testing comes into play. By subtracting costs such as living expenses, cost of health care, any education costs from the consumer’s average income total, the determination of qualification for Chapter 7 bankruptcy is made by the amount of money left over after all of these presumed expenses are subtracted. If the consumer in question is not qualified to file for Chapter 7 bankruptcy, then they will typically file for Chapter 13 bankruptcy.
There is also a wait-period between bankruptcy discharges and re-filing that is dependent on the type of bankruptcy previously filed. This wait period is typically anywhere from six to eight years. However, there are several creditors that are willing to look past your credit report bankruptcy records and look straight into your wallet. Just months after discharging a bankruptcy filing you can often times still get a car loan or even a mortgage, so long as you have sufficient income to the creditors. The downside? While your credit will seemingly not be taken into account, that isn’t entirely true. Sure you will be able to get the car or home you seek, but the rates given to you will be quite expensive.
At Prime Credit Experts, we will advise you on the best way to manage your credit after filing bankruptcy while we work to remove those bankruptcy discharges from your credit reports.
To request more information on how to remove bankruptcy discharges and any other items holding you back from having excellent credit Sign Up Now.