Filing for bankruptcy is a last-ditch option for when someone is in heavy debt that becomes overwhelming to manage. However, it’s not to be taken lightly, as there are consequences for filing a Chapter 7 Bankruptcy, you should know about. Continue scrolling to learn about this type of bankruptcy and how it can affect getting a mortgage.
What is Chapter 7 Bankruptcy?
Otherwise known as a “straight bankruptcy”, Chapter 7 bankruptcy makes you go through a legal process overseen by federal bankruptcy courts. It enables individuals and businesses to eliminate part of or all of their debt, or help them repay some of what they owe. Bankruptcy can solve a short-term problem, but it can have long-term effects. Your credit is affected, which ripples down to getting loans for cars, homes, or business. It also affects your ability to open any credit card accounts.
When filing for bankruptcy, there are applicable rules and regulations you must follow that include meeting requirements, such as proof you can’t afford to pay your debts. You will also need to complete credit counseling with a government-approved credit counselor. Under this type of bankruptcy, you must allow a federal court trustee to supervise any sale of assets that are not exempt, including:
- A second car or truck
- A second home or vacation home
- Valuable family heirlooms
- Expensive musical instruments — unless the debtor is a professional musician
- Collections of stamps, coins, bonds, and other investments
- Cash, bank accounts, stocks, bonds, and other other investments
Exempt property includes:
- Motor vehicles (up to a certain value)
- Household appliances
- Reasonably necessary clothing, household goods, and furnishings
- Jewelry (up to a certain value)
- A portion of unpaid but earned wages
- Tools of the debtor’s trade or profession (up to a certain value)
- A portion of the debtor’s equity in the home
- Public benefits, such as public assistance, (welfare), social security, and unemployment compensation — accumulated in a bank account.
Money from the sale of non-exempt assets goes toward paying your creditors, and the balance of what you owe is then eliminated after the bankruptcy is complete. Chapter 7 Bankruptcy does not apply to court-ordered alimony and child support, taxes, and student loans.
Consequences of Filing Chapter 7 Bankruptcy
As stated above, there are several consequences for taking out bankruptcy. You will likely lose property and have the bankruptcy on your credit report for 10 years after the filing date. You may not qualify for a car or home loan for 7 years after. Should you get back into debt, you won’t be able to file for bankruptcy for another 8 years.
Bob Buys Houses Can Help
If you’re facing Chapter 7 bankruptcy or have already filed and need to move, let us help. We buy homes for cash and can get you money in-hand shortly after closing, which could be completed within a week. Best of all, there are no fees or commissions. How? Contact us to learn more, or visit our home page for more information. We serve the Salt Lake City, UT area.