Bankruptcy can be a viable alternative that enables consumers to legally clear debts that they cannot conceivably pay back over any length of time, putting an end to harassing phone calls and letters. Prior to filing for a Chapter 7 or Chapter 13 bankruptcy, it is important to be educated on the process and the types of debts that can and cannot be placed into a bankruptcy filing or be discharged. It is also wise to be educated on the short- and long-term effects that bankruptcy will have on your finances and your credit when considering the ramifications to your financial future.
Significance
Bankruptcy filings have very significant consequences to your overall financial health. While most experts recommend including all debt in bankruptcy filings, there are certain types of debt that cannot be included. These include child support, student loans, back taxes and some credit card cash advances. Debts incurred from credit cards not related to cash advances, or other types revolving loans such as personal loans or car loans, should all be included in the bankruptcy filing.
Types
Cash advances that are included in the bankruptcy filing for either Chapter 7 or Chapter 13 that are over $750 total and under 70 days old will not be discharged. Any cash advance taken prior to that where the results of cash in hand to the individual filing bankruptcy are considered fraudulent and are immediately due to the creditor in a bankruptcy case. If immediate payment cannot be made, payment arrangements will have to be agreed upon to clear the cash advance debt. This is more plausible in a Chapter 13 than a Chapter 7. Chapter 7 bankruptcies will require the full amount of the cash advance be paid prior to the creditor discharging the debt through the courts.
Considerations
If an individual filing bankruptcy has active checking or savings accounts with a banking entity where she also has credit cards and other unsecured loans, the money deposited in checking or savings accounts can be taken by the bank to pay off any outstanding debts prior to the bankruptcy being discharged. When filing a bankruptcy where numerous types accounts are shared with checking or savings accounts, it is wise to open up checking or savings accounts with other financial institutions and have all liquid assets moved to an account not associated with any unsecured debt.
Misconceptions
Many individuals filing a Chapter 7 or Chapter 13 bankruptcy believe that they can max out all available trade lines and not be required to pay them back when filing bankruptcy. This is not the case at all. If charges are continuing to accrue and credit trade lines being used within three months of declaring bankruptcy, all of those charges can be considered fraudulent, since it becomes obvious the debtor had no intent of repaying the debt or making arrangements to repay the debt prior to accessing all available lines of credit.
Warning
Bankruptcy filings should not be taken lightly. Declaring bankruptcy will have a very serious and long-lasting impact on your financial future. When considering bankruptcy as an option, speak with an attorney who specializes in bankruptcy proceedings to ask what debts can be discharged and inquire about the length of the process of rehabilitating credit after bankruptcy.
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