If you are struggling to make your ends meet as your monthly repayments are relatively higher than your disposable income, chapter 7 bankruptcy can help you out. Although the chapter 7 bankruptcy laws were tightened in 2005 to prevent abuse and there are new restrictions on filing, it is still possible for most people to qualify under these new set of guidelines and attain a debt free life by declaring personal bankruptcy in just 4 to 6 months.

Chapter 7 Bankruptcy Laws

The Bankruptcy Abuse Prevention and  Consumer Protection Act 2005 came into effect to ensure that the people, who could afford to repay their debts, should pay it off. This also gave birth to a new test, which compares that person’s
income to the median for the state they live in. Those, who have their income below the state median, would qualify for chapter 7 bankruptcies.

Paying Off Credit Card Debt and Non-Exempt Assets

Although having non-exempt assets won’t refrain you from paying off debt under the new bankruptcy laws, it is a huge consideration. During chapter 7 procedure, you are entitled to keep exempt assets, such as a reasonably priced car or primary residence, but if you have a second home, luxury sports car or valuable antiques, you are expected to hand over those items to a trustee, so that these can be sold in order to repay your outstanding debts. As personal bankruptcy can lead you to the loss of your assets you must think twice about its alternatives like chapter 13 or debt settlement, before filing for chapter 7.

Alternatives to chapter 7

If you have a steady cash flow and have some disposable income to offer your creditors, you must consider other debt solutions like debt management plan or debt settlement program. These debt relief plans work by improving affordability or by reducing the amount owed.  Although paying off credit card debt takes longer than filing chapter 7 bankruptcies, it has less dramatic impact on your credit rating. Bad credit has its negative consequences as well. A bad credit means that the attainment of future credit will not only become more expensive, but also more difficult. However, it’s possible to get federal student loans, poor credit history finance or even a bankruptcy car loan shortly after discharge.

Keep the above mentioned points in mind and make sure you seek help and guidance of a reputed credit counselor, before you begin the proceedings of chapter 7 bankruptcies.

This article written by Donna Nell, USA specialising in chapter 7 bankruptcy.