Bankruptcy: Waiting It Out Or File?
Many folks who were victims to the Great Recession of 2008 lost their businesses and/or jobs which has devastated their financial profile and ruined their credit. Many have found employment on jobs that they are overqualified for and have taken a substantial housing income reduction where they are still struggling to get by and prior bill collectors are still hounding them after many years. Others have multiple judgments and judgment creditors are trying desperately trying to place garnishments and freezing their bank accounts. You can file bankruptcy and wipe out those debts and get a fresh start or you can just wait it out until the statute of limitations period expires. This choice depends on the type of debts you have, how old those debts are, and what your creditors are doing in trying to pursue those old debts.
Bankruptcy Or Waiting The Statute Of Limitations To Expire?
If you are thinking of contemplating to either file bankruptcy or waiting it out, there are certain things you need to consider such as if you are judgment proof. Being judgment proof is when you have very little or no assets and no equity in your property. You can have exempted properties such as your personal residence with a certain amount of assets which the judgment creditor cannot go after you for. Non-exempt assets such as second homes and investment properties can be gravy and a judgment creditor will go after that if they find out there is equity in them. Other exempted assets include cars and a cap on your annual gross income. The cannot go after your wages if your income will barely cover your monthly living expenses. However, if you make six figures and have plenty of disposable income, the judgment creditor can go after wage garnishment. If you are unemployed or underemployed, you are judgment proof. A judgment creditor cannot go after unemployment benefits, pension income, social security income, disability income, or other fixed income that you need to survive and provide basic living expenses. If you do not foresee you income situation to change for the better and you can live with bill collectors and collection agencies harassing you from time to time, not filing bankruptcy and waiting out your statute of limitations may be your best option. You need to remember that you cannot qualify for a residential mortgage loan until the judgment is settled by either paying it off or having a payment agreement with the judgment creditor.
Bankruptcy: Discharge Of Debts
Bankruptcy is somewhat like a get out of debt card and you can only use it once every 7 years. Unfortunately, not all debts can be discharged with a bankruptcy. Tax liens and government loans are not dischargeable in a bankruptcy. You can still keep your home and car after you file bankruptcy. With a Chapter 7 Bankruptcy, you get to keep whatever you can afford and not include it in the bankruptcy. Maybe wiping out your credit card and medical debts might give you breathing room to be able to pay your mortgage payments and car loan. Chapter 13 bankruptcy restructures your overall debts and creates a new repayment plan for a period of 3 to 5 years. We will discuss more on Chapter 7 and Chapter 13 bankruptcies in future blogs.