Why Not File for Bankruptcy?
- You must meet certain income and other requirements to qualify for a bankruptcy. If your income is higher than the median income for your household size, you are ineligible for a Chapter 7 bankruptcy. Likewise, if your secured debts exceed $1,010,650 and your unsecured debts exceed, $336,900, you are ineligible for a Chapter 13 bankruptcy.
- Filing for bankruptcy can have a negative impact on your credit for several years. Bankruptcy public records remain on your credit report for up to 10 years from the date you file. Delinquent accounts included in the bankruptcy will not be removed from your report once the bankruptcy is discharged. Rather, these accounts will remain on your report for seven years from the date they became delinquent. The status of the creditor accounts are updated to show they are included in the bankruptcy, but they will still appear as a negative account on your report. Negative accounts impact your ability to obtain new credit.
- You should think twice about filing for bankruptcy or at least strongly consider the type of bankruptcy you file if you want to keep some of your personal property. In a Chapter 7 bankruptcy, you will have to turn over certain property to the trustee for liquidation. The proceeds are sold to pay off some of your debts. Items you will most likely have to give up include cash, bank accounts, investments, a second home or car and family heirlooms. Some property is exempt from bankruptcy, meaning you are usually allowed to keep it after you file. Exempt property includes items such as motor vehicles up to a certain value, clothing, household appliances, furniture, a portion of your home's equity, jewelry up to a certain value and pensions.
- The fees associated with bankruptcy can be quite expensive, especially if you hire a bankruptcy lawyer. Bankruptcy attorneys' fees range between $1,000 and $2,000 depending on the severity of your case. Many people facing bankruptcy cannot afford to hire a bankruptcy attorney because they are so deep in debt. In addition to the cost of an attorney, bankruptcy filing fees must be paid directly to the courts to begin the filing process.
