Chapter 7 offers a clean slate

You have undoubtedly hit many low points as you struggled to get your finances back in order. Whether your troubles stem from a job loss, medical emergency or just poor planning, it seems like no matter how great an effort you make to get on track, the bills keep coming and the debt keeps rising.

Perhaps the lowest point in this financial struggle is the moment you realized bankruptcy was your only option. However, instead of seeing this moment as a low point, it may help if you look at it as a turning point. From this day forward, if all goes well in your bankruptcy process, you are moving toward a brighter future.

How bankruptcy can work for you

Chapter 7 bankruptcy has several elements. The first involves the liquidation of your assets. An attorney can help you negotiate keeping the assets necessary for your daily life, and your creditors will receive a portion of what you owe them from the sale of the rest. The second element is that, after receiving their portion from the liquidation of your assets, most of your creditors will likely release you from the rest of your unsecured debt. Unsecured debt may include any of the following:

  • Credit cards
  • Personal loans
  • Medical bills
  • Utility bills

Debt that is secured by collateral, such as your car payment or mortgage, may survive a bankruptcy, so arrangements will have to be made to deal with those debts. Other debts that a bankruptcy cannot discharge include the following:

  • Child support
  • Spousal support
  • Back taxes from the past three years
  • Student loans

There are some rare exceptions for student loans, and your attorney will help you determine if these are something you can pursue in your circumstances. It is possible that once your medical bills and credit card debts are gone, you will be able to better manage those other payments.

Making lemonade

Your outlook on your bankruptcy process can make a difference in your success. Remaining focused on the possibilities instead of the disappointments of the past can keep you motivated to continue to improve your finances.

For example, while many think that bankruptcy goes on forever and does irreparable damage to someone's credit, these things are not true. The process itself only takes a few months, and after that, you can begin rebuilding your credit immediately. It doesn't take long to put the bankruptcy behind you, and some New Jersey banks are willing to help you by giving you short lines of credit to raise your score. Within a few years, you may be eligible for a mortgage on a new home.

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