According to the American Bankruptcy Institute and Federal Reserve Bank, more than half of the personal bankruptcies filed by consumers in recent years were due to credit card debt. The next highest category was due to personal medical expenses, much of which was paid for using credit cards but not reflected in the credit card statistic, followed by home mortgages.

There are many occasions when filing for bankruptcy protection is an excellent option, and we will advise if it appears to be your best option when you speak with one of our representatives.

Under most circumstances, the advantages are that in addition to being legally protected, only a few months are required for a Court appointed Trustee to approve a bankruptcy plan. Once approved, you cannot be sued for the accounts included in the plan, the terms of the plan are generally permanent and not easily changed, unless fraud is discovered. With Chapter 7 bankruptcy, the debt approved in the plan is completely eliminated and except as noted below, so is the percentage of your debt in a Chapter 13 plan which is cancelled.

Nonetheless, filing for bankruptcy protection can result in serious, long term, consequences. For consumers, Chapter 7 and 13 personal bankruptcy requires full disclosure of your assets and a financial statement that includes every detail about your monthly expenses, including rent or mortgage, utilities, groceries, prescriptions, dry cleaning, insurance, etc. The law also requires that you enroll in and complete a Personal Financial Management Instructional Course. If you work for a government agency or company that periodically reviews your credit history, this publically available information can result in the loss of your job.

Like debt settlement, a bankruptcy remains on your credit report and can affect your ability to obtain credit, buy a home, get life insurance, or find a job for several years. Secured credit cards requiring a full deposit for the amount of credit sought are typically the only type of credit card you can obtain for seven to ten years, and a record of your bankruptcy remains in Court records up to twenty years. Most job, mortgage and credit applications ask if you ever filed for bankruptcy, and it is a Federal offense if you do not answer this question truthfully.

Chapter 7 personal bankruptcy may require the liquidation of some, or all, of your assets which are not considered exempt. Automobiles, household furnishings, and work-related tools are considered exempt property, however the asset value of these items must not exceed the extremely low values defined in Federal and State bankruptcy guidelines. A Court appointed official or trustee has the right to sell your assets and other property to pay your creditors. It has become increasingly difficult for most people to qualify for Chapter 7 bankruptcy due to exceptionally low income and asset requirements.

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