Consider the Consequences of Filing for Bankruptcy
Filing for Chapter 13 or Chapter 7 may be an option if your debt is out of control. Chapter 13 requires a payment plan in which you pay off all or part of your debt. Chapter 7 is a type of fresh start where your debts are wiped out and you are requied to rebuild your credit rating from scratch. In either case the burden of debt and legal action will be eased, but both have consequences that are important to understand prior to filing. Either Chapter 7 or Chapter 13 are lengthy commitments. You are committing to payments and solving a problem, but on the other hand, you are also committing to several years of being viewed as a major credit risk. This means different things for individuals, but be sure to understand the consequences before filing. Cincinnati bankruptcy attorneys will help you understand your filing rights and obligations before you reach a Cincinnati bankruptcy court. If either option is in your future, be sure you talk to a professional before filing.
You need to understand what, if anything, will change your taxes, should you choose to file. If you are used to receiving a refund at the end of the year, you may have to forfeit this. It is considered disposable income and you may end up losing 50% to 100% of the return. However, there are ways you can protect this money. Another choice is to claim higher withholdings from your income. This puts more money into their pocket on the monthly basis and creates a situation where you receive no refund. However, be sure to increase the withholdings without creating risk of taxes being due in April.
Another way to protect a refund is to have the money placed into a retirement account throughout the year. This leaves you with less access to your monthly income, but keeps the funds safe from creditors. This also enables you to plan for the future and it gives you something to look forward to once you repayment period has ended and it is time to retire.
Filing Chapter 13 and Chapter 7 will get you denied future credit. For up to a decade you may be undesirable for mortgages, car loans, and unsecured credit. It may also be difficult for you to find employment, to open a checking or savings account, or to be cleared for certain types of employment.
If you plan to marry, it can reduce the options you share with your spouse concerning home ownership. You will be asking them to take on some of the consequences of your filing, which is important to understand before you file.
Connor Sullivan recently worked with a group of Cincinnati bankruptcy attorneys while conducting research for a new article. He learned about providing debt restructuring while observing aCincinnati bankruptcy court.
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