What to Consider for Those Filing for Bankruptcy
Filing for Chapter 13 or Chapter 7 may be an option if your debt is out of control. Chapter 13 allows you to create a payment plan over the course of several years in which you pay off all or part of your debt. Chapter 7 gives you a fresh start and you are requied to rebuild your credit rating from scratch. In either case the burden of debt and legal action will be eased, with certain legal requirements and consequences. Either Chapter 7 or Chapter 13 should be viewed as commitment. You are committing to paying off or removing your debt 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 it is important to understand all of the ways in which a filing will affect you. Cincinnati bankruptcy attorneys will explain your options 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, this may be vulnerable to creditors if you have filed. It is considered disposable income and you may end up losing 50% to 100% of the return. However, protection for this money is available. Some choose to claim higher withholdings throughout the year. This puts more money into their pocket on the monthly basis and creates a situation where you receive no refund. However, you must be careful to increase your withholdings properly to avoid owing tax at year's end.
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, the money will be protected in a tax free account that is not vulnerable to creditor attack. This also helps you plan financially for the future and it gives you something to look forward to following your debt release.
Filing Chapter 13 and Chapter 7 will get you denied future credit. For up to a decade you may find yourself unable to get loans for vehicles or mortgages, and you may be denied unsecured credit like credit cards. It may also be difficult for you to find employment, to open a checking or savings account, or to gain certain clearances affiliated with employment.
If you plan to marry, it can reduce the options you share with your spouse concerning home ownership. They will be taking on some of the consequences of your filing, so keep that in mind if you are considering this option.
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, this may be vulnerable to creditors if you have filed. It is considered disposable income and you may end up losing 50% to 100% of the return. However, protection for this money is available. Some choose to claim higher withholdings throughout the year. This puts more money into their pocket on the monthly basis and creates a situation where you receive no refund. However, you must be careful to increase your withholdings properly to avoid owing tax at year's end.
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, the money will be protected in a tax free account that is not vulnerable to creditor attack. This also helps you plan financially for the future and it gives you something to look forward to following your debt release.
Filing Chapter 13 and Chapter 7 will get you denied future credit. For up to a decade you may find yourself unable to get loans for vehicles or mortgages, and you may be denied unsecured credit like credit cards. It may also be difficult for you to find employment, to open a checking or savings account, or to gain certain clearances affiliated with employment.
If you plan to marry, it can reduce the options you share with your spouse concerning home ownership. They will be taking on some of the consequences of your filing, so keep that in mind if you are considering this option.
About the Author:
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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