Filing for Chapter 13 or Chapter 7 is a last resort for those who are in debt over their head. Chapter 13 requires a payment plan 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. 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 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 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.
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 there is no annual refund to garnish. 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 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 be cleared for certain types of 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, so keep that in mind if you are considering this option.
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. Click here to get your own unique version of this article with free reprint rights.
