Bankruptcy is a means to relieve you from the oppression of unpaid debts. However, bankruptcy isn’t always a good idea. There are some instances when filing a Chapter 7 bankruptcy may be a bad idea under certain circumstances.
It is a bad idea if your debts are not unsecured. Filing for bankruptcy may be okay to relieve you of credit card debts, but it cannot relieve you from paying debts on a mortgage or a loan with a collateral. To obtain a mortgage or loan, you often must put up property as collateral. A collateral is security for the loan, which means that if you are unable to pay the loan, the creditor will put a lien on the property and the creditor will sell the property. The proceeds will be applied as payments. Thus, if the loans you cannot pay are loans with a collateral, such as in a mortgage, bankruptcy will not discharge the mortgage.
It is a bad idea if you intend to secure a loan, start a business or buy a house ten years after you file a Chapter 7 bankruptcy. Bankruptcy is a public proceeding and the bankruptcy records remain on your credit record for ten years. Thus, when you apply for a loan or you want to buy a house, even when you apply for a job, a credit investigation or background check will reveal that you have filed for bankruptcy. Your credibility and reliability will be questioned, and people may not trust you.
It is a bad idea if your unpaid debts result from unpaid taxes of child and spousal support. If your unpaid debts consist of unpaid state or federal taxes or unpaid child support or spousal support, bankruptcy cannot help because these types of loans are not discharged through bankruptcy. They are specifically excluded from the scope of bankruptcy.
It is a bad idea if you have family heirlooms. A Chapter 7 bankruptcy usually involves a receiver who will be appointed by the Bankruptcy court to seize all your available assets into a pool and sell those assets. The proceeds of the sale will be distributed among your creditors. If you have jewelry passed on to you by your grandmother, or any valuable property passed on to you as heirlooms, you will lose them. Everything of value will be seized by the receiver and sold off to pay your creditors. You may lose your car and even your home, so your creditors will be paid.
While bankruptcy may a solution for some people, it is not a solution that fits all people in all circumstances.
About The Law Offices of Nicholas J Del Pizzo
A Baltimore Lawyer that is an experienced and dedicated attorney who knows that people have legal needs that simply do not coincide with regular business hours. At The Law Offices of Nicholas J Del Pizzo, III P.A. in Baltimore, Maryland, we make ourselves available for our clients when they are facing foreclosure of their home, bankruptcy, personal injury, or medical malpractice.