Should You Consider Alternatives to Chapter 7 Bankruptcy?

Determining if Chapter 7 bankruptcy aligns with your financial goals requires careful consideration. Ask yourself these pivotal questions before proceeding:

• Could creditors legally seize your property or income if you skip filing for bankruptcy?
• Will your debt relief through bankruptcy be substantial enough to justify the process?
• Are you at risk of losing possessions that are crucial to you?

What Does Being Judgment Proof Mean for You?

Most unsecured creditors must secure a court judgment before they can commence collection actions, such as wage garnishment or personal property confiscation. There are exceptions for taxes, child support, and student loans.

Being “judgment proof” means you possess no property or income that creditors can legally target, often because it’s protected (like Social Security income) or exempt. If this describes your situation, you’re essentially immune from legal financial claims against you, making bankruptcy a choice rather than necessity.

Could Other Strategies Curtail Creditor Harassment?

Bankruptcy is sometimes considered as a remedy for persistent creditor harassment. Yet, in many instances, simply instructing creditors to stop contacting you at home or work can be effective and give you the peace of mind you seek.

Are Your Debts Eligible for Discharge in Chapter 7 Bankruptcy?

It’s essential to recognize which debts can and cannot be wiped clean via Chapter 7 bankruptcy. Ineffectual in discharging certain obligations, Chapter 7 may not serve your main purpose if you’re hoping to eliminate:

• overdue child support and alimony,
• student loans, barring cases of exceptional hardship,
• recently incurred tax debts,
• recent large purchases or cash advances,
• damages due to DUI incidents.

Moreover, if creditors challenge, the court may consider additional debts non-dischargeable, such as those from fraud, willful injury, theft, or divorce-related settlements. Still, even if a fair portion of your debt may potentially be discharged, it’s worth considering bankruptcy as your creditors may not contest it.

Warning: Consider the Responsibilities of Codebtors

Remember that discharging shared debts won’t release your codebtors from their financial obligations. While you can shed your liability for dischargeable debts, your codebtor might still bear the full burden.

Which of Your Belongings Could Be Subject to Seizure?

In assessing the viability of filing for bankruptcy, evaluate which assets are “exempt” (you keep) versus “nonexempt” (used to settle debts). States generally grant exemptions to property like:

• vehicles, up to a certain value,
• necessary attire and household items,
• everyday appliances,
• modest amounts of jewelry and personal effects,
• specific insurance benefits,
• retirement funds,
• home equity portions,
• professional tools,
• a portion of your wages, and
• public aid in a bank account.

Conversely, items like valuable musical instruments (unless part of your profession), collectibles, heirlooms, investment accounts, additional vehicles, and supplementary properties may be at risk of seizure.

For advice tailored to your specific circumstances, contact James H. Wilson at 804.740.6464. Our team can help you understand your options and determine if bankruptcy is the right step for you or whether alternatives would better suit your situation.