Bankruptcy can be one of the most stressful situations that one can go through. When people lose their businesses, they end up facing depression, drug abuse, and other life-threatening conditions. But if these people would have had the knowledge required to go through insolvency successfully, they would have minimized their stress. Here are four tips for handling Chapter 7 bankruptcy.
1. Secured and Unsecured Debt
When handling insolvency, it is critical to know the various types of debts, which are secured and unsecured. Secured debts are normally linked to an asset like a home or car, while unsecured debts are not linked to a particular asset. Credit card debt is a good example of an unsecured debt, especially because credit cards are usually used to buy daily items like food, clothes, and other personal items. Hence they need no security. When it comes to these two debts, secured debt has higher priority than unsecured.
2. Complete Liquidation of Debt
The distinction between Chapter 13 and Chapter 7 bankruptcy forms is that Chapter 7 has a total liquidation debt. In a majority of the situations, no property or assets are present in Chapter 7 form of bankruptcy that are sufficient to pay off the creditors fully. Creditors are listed with regards to priority, and unsecured debt, like credit cards, are usually at the end of the list. These debts are then cleared by a portion of the claim filed. In numerous times, no money remains after all priority debt is satisfied. This leaves credit companies without any payment.
3. Exceptions to Discharge of Credit Card Debts
While insolvency filing fails to discharge credit card debts, it might not always be the case. Some debtors try to spend as much as they can with their credit cards before filing for insolvency because they know they will be discharged. But if a charge is incurred via false pretenses or fraud, the debt will remain, and you will be liable for it.
4. Exceptions for Fraudulent Charges
If you are being accused of making fraudulent purchases with your credit card, particular exceptions exist to aid you out of this scenario. For instance, if you took a cash advance of $950 70 days before you filed for insolvency, this debt will be presumed fraudulent. If you can overcome the presumption that you committed fraud via showing that you made the purchases with the intention of paying, then the accusation will be dropped. But this is a difficult process.
Being careful with unsecured debts like credit cards is the best thing to do. This and the other three tips will help you smoothly sail across this stressful situation.
