For many Americans, debt is simply an unavoidable fact of life. But what happens when debt piles up to the point where it is out of control? For many people facing this issue in South Carolina, personal bankruptcy is an option that may make sense. The most common of these individual bankruptcy types are Chapter 7 and Chapter 13 bankruptcy.
Chapter 13 bankruptcy is more of a repayment assistance system, wherein the filer has some discretionary income and can pay down some debts. Those filing for Chapter 7 bankruptcy, meanwhile, are in a much more challenging situation. In these cases, a trustee is appointed and can sell nonexempt assets such as a car or house at will to creditors. Typically, these assets must be of little worth and have no equity for Chapter 7 bankruptcy to be utilized.
Who files for Chapter 7 bankruptcy? Typically filers have no or little income and cannot pay off debts with their cash flow or by liquidating assets themselves. This move will naturally hit a credit score hard, usually knocking it down about 200 points. Chapter 7 bankruptcy will remain on a filer’s credit report for 10 years.
Despite this hit, filers can rebuild their score by demonstrating solvency and making good financial decisions. This can include bringing in more money by getting a new or better job, budgeting and paying off any bills that do come in such as car payments or rent. Individuals in South Carolina considering Chapter 7 bankruptcy as an option should work with a bankruptcy lawyer to understand their options.
Source: whio.com, “What is Chapter 7 bankruptcy?”, Craig Johnson, May 14, 2018