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 is a type of fresh start where your debts are wiped out and you are requied to start over building credit. Either way 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 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 have labeled yourself for a long time. 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 get into a Cincinnati bankruptcy court. If either option is in your future, be sure you speak with your attorney considering all of the filing.
It is important to understand what, if anything, will happen with your tax return, 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 viewed as 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 gives you additional income through the year and creates a situation where there is no annual refund to garnish. However, you must be careful to increase your withholdings properly to avoid owing tax at year’s end.
You can also protect your refund by placing the money into a retirement account throughout the year. While you will have less access to your monthly income, but keeps the funds safe from creditors. 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 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 gain certain clearances affiliated with employment. If you plan to marry, your prospective spouse can be affected not by being held liable, but having their options reduced when it comes to owning a home or getting a fair interest rate on loans. You will be asking them to take on some of the consequences of your filing, which is important to understand before you file.
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