Let’s say you face unemployment and now face wage garnishment and wonder whether you should file Chapter 7 bankruptcy.
If your creditors have been on your neck and your income is not forthcoming, you could be experiencing financial hardship that you would do anything to get out of. Bankruptcy is a debt relief option that can get you out of debt.
However, like everything else, filing for bankruptcy has its pros and cons. So, it is important to understand everything about bankruptcy before filing to ensure it is the right decision. We will discuss everything you need to know including common mistakes to avoid before filing. Read through our guide before rushing to fill out your form.
How Well Do You Understand Your Options?
Which type of bankruptcy will you be filing? There are two common types of bankruptcy: Chapter 7 and Chapter 13 bankruptcy. We will discuss each type of bankruptcy and its pros and cons to ensure you make an informed decision on which Chapter suits you best.
You can also use a wage garnishment calculator to:
- Estimate your eligibility to file Chapter 7 banlrup[tcy
- Estimate your prepayment plan if you decide to file for Chapter 13 bankruptcy
- Understand the pros and cons of each type of bankruptcy
- Compare the cost of filing the two types of bankruptcy
- Compare the efficiency of bankruptcy to alternative debt relief options available to you
Chapter 7 Bankruptcy and Wage Garnishment
This is the most common type of bankruptcy, which offers a fast solution out of debt while protecting your assets. However, before filing, you need to be sure this is the right move for you. Should you happen to change your mind midway after filing, you might not get debt discharge.
Chapter 7 bankruptcy is also referred to as liquidation bankruptcy because of the method used to discharge your debts. The court could liquidate your assets to pay off your debt. You can find an experienced attorney who can guide you and help you understand your legal options here: tulsabankruptcylawyers.net/bankruptcy-attorney-tulsa-chapter-7-bankruptcy.
Thankfully often a Chapter 7 bankruptcy can stop a wage garnishment. That said, you could take a wage garnishment calculator to help you estimate how much you will be garnished.
Advantages
It is affordable
Filing Chapter 7 is more affordable compared to filing Chapter 13. Hence its popularity. So, if you are facing unemployment, you can take an unemployment calculator to see what your weekly benefit may be. Some individuals may use these funds to pay for the Chapter 7 fees.
Stops lawsuits initiated by your creditors
Filing for Chapter 7 bankruptcy will stop any lawsuit against you. If the court grants you a discharge for the debt a creditor had sued you for, they will have to accept the court ruling and cannot pursue you any further.
You retain ownership of Your property
There are bankruptcy exemption laws that will help protect assets that qualify from liquidation. So you can keep your property safe from liquidation.
Offers a fast way out of debt
If you want to get rid of your debts fast, file a Chapter 7 case. It takes four to six months to get debt relief for no-asset Chapter 7 cases.
A favorable solution to deficiencies
A creditor can foreclose or repossess your property to clear an outstanding debt. The difference is called a deficiency. If the amount they get from the foreclosure or repossession is still less than what you owe, the creditor will hold you liable to pay the deficiency.
When you file for Chapter 7 bankruptcy, you can do away with deficiency judgments. According to Chapter 7, once you surrender collateral, it doesn’t matter whether the creditor collects enough money or not. They cannot ask for more money to clear the same debt.
Disadvantages
Not all debts can be discharged
Although you are filing for bankruptcy to get rid of debts, not all debts are dischargeable—for example, government debt, taxes, restitutions, alimony, and child support cannot be forgiven.
You risk losing your property
Since chapter 7 focuses on liquidation to get debtors out of debt. So you stand to risk property not covered by bankruptcy exemptions. It is best to consult a bankruptcy lawyer before filing to estimate your risk of losing property.
It is more difficult to stop repossession and foreclosures with Chapter 7
Unlike chapter 13 bankruptcy which allows you to work out a repayment plan where you can keep your car or mortgage, Chapter 7 does not offer any repayment plan. So, you must catch up with secured loan payments to avoid losing collateral.
Not everyone is eligible to file
There are income requirements that debtors need to meet to be eligible to file for Chapter 7 bankruptcy. Unfortunately, not everyone possesses the Means Test or the second section of the test. However, those who are not eligible can consider filing Chapter 13 or other alternative debt relief measures.
Filing will hurt your credit Score
Filing for chapter 7 bankruptcy will negatively affect your credit score, and the information will be on your credit report for ten years. Do your research and understand how filing Chapter 7 bankruptcy could affect your credit score before filing.
Wage Garnishment and Bankruptcy
Bankruptcy tends to be a last option for many individuals. While many individuals may file bankruptcy when facing a bankruptcy, you generally have different options to consider. Also, consider the pros and cons of bankruptcy to help you make the most informed decision.