Chapter 7 bankruptcy has a bad reputation. Of course, it's not a process that anyone undertakes lightly, and it's usually reserved for those people who are seriously in deep debt, and who are already in a dark, stressful place. However, there is life after bankruptcy, and no matter how stressful things get, you will survive, In fact, some people find that filing for Chapter 7 bankruptcy is one of the best things that they could ever do for their finances. Here are some tips on how you can survive and thrive during, and after, filing for Chapter 7 bankruptcy.
Be honest and complete when listing your debts.
When you file for Chapter 7 bankruptcy, you must list every debt that you owe, even if you plan on paying some of those debts back. Some debts can be reaffirmed, which means you agree to keep that debt and be responsible for paying it back after your bankruptcy. For example, if you have a loan that you are repaying because you purchased a car, it may be in your best interest to reaffirm that debt, and keep making payments in order to keep the vehicle.
You won't necessarily lose all of your "stuff" when you file.
Under a Chapter 7 bankruptcy, all of your unsecured consumer debt is wiped out, and your assets can be sold to repay the debts. However, you needn't worry about losing everything that you own. Most states allow people filing for bankruptcy the chance to keep the basic necessities, such as a car for getting to work and school, furniture in the home, and other household items.
Exemptions are in place to secure a decent standard of living for people filing for bankruptcy, and if you have property that exceeds the exemption limits, you could have to surrender the items to be sold to repay your creditors. Speak with your bankruptcy attorney if you aren't sure whether any of your belongings fall into this category. Never try to lie or hide property in order to keep it. If you are found to be doing this, it could jeopardize your bankruptcy case, and you could be in big trouble.
You may lose your bank account.
If you owe money to the bank, they will likely take the money in your checking account to pay down the debt. This is common practice, and most banks will close the account once they've taken the money to repay the debt you owe them. Banks can use this "set-off" to reduce their losses, regardless of how this inconveniences you. If you owe money on a bank credit card or loan, go ahead and move the money out of your checking and savings accounts prior to filing for bankruptcy. Open a new account at a different bank or credit union, and consider it part of your "new start."
Your credit may not be obliterated.
While it's true that a bankruptcy remains on your credit report for up to 10 years after you file for a Chapter 7 bankruptcy, this doesn't mean your credit is completely obliterated. It's true that a bankruptcy has a very negative effect on your credit report, but with careful spending, cautious borrowing and a new attitude towards your personal finances, you can repair any damage done to your credit score within a few years.
Secured credit cards, secured loans and on-time bill payments can help rebuild your credit, but be careful to know your limits. If too much credit card or loan debt led you to file for bankruptcy, you may want to evaluate whether using credit is even a good idea for you.
Keep in touch with your Chapter 7 bankruptcy attorney throughout the process, and keep a positive attitude. This can help you survive and thrive throughout the bankruptcy proceedings and beyond, to a brighter financial future.