If you are considering bankruptcy it’s likely you are living paycheck to paycheck, struggling to pay your bills, and accumulating substantial debt each month. So what can bankruptcy do for you? Recently on our bankruptcy forum a user asked, “If I file bankruptcy will it help me get more money?”
Get more money and discharge debt
Certain filers, who qualify for Chapter 7 bankruptcy, may have be able to immediately discharge their unsecured debts. Assuming your income is not too high and you have limited disposable income, you may be able to file Chapter 7 bankruptcy and have unsecured debts such as medical bills and credit card debts discharged.
Whether or not this will get you more money each month in which to live depends on your debt. For instance, if you are paying $500 per month to service credit card debt, if that debt is discharged, you will have an additional $500 per month to pay for other necessities. If you have high medical bills you are struggling to pay each month, it could be the same story.
In both of these cases, discharging your unsecured debts could free up additional money and give you more money to spend each month on other items.
What if I cannot immediately discharge my debts?
Regulations were tightened in 2007, limiting the number of filers who could have their debts immediately discharged. Many debtors who at one time could have filed Chapter 7 bankruptcy are now thrust into Chapter 13 and forced to repay a portion of their debt obligations.
Whether or not you will have to do this will depend on your income and whether the court decides you have enough discretionary income to repay your debts. This is determined using the Chapter 7 Means Test.
If you file Chapter 13 you will have to create a 3 or 5 year debt repayment plan to repay a portion of your debts. Whether or not you will have more money each month to spend will depend on your plan and how the debt payments are structured. It is likely that the money you are paying now towards your bills would simply be redirected towards your repayment plan, which may or may not leave you with more money each month.
Other than an immediate discharge of certain debts, as mentioned above, I am not sure how bankruptcy will provide more money to you. Consider also, filing bankruptcy is a serious decision. While it could free up more money and give you a fresh financial start, it will make it more difficult to borrow money, will increase the cost you pay to borrow, it will lower your credit score, and it will remain on your credit report for up to 10 years.
Other ways to get more money?
One of the best ways to generate more money is to find additional work. Many debtors are able to find part-time work, especially during the holidays, to supplement their current income. Rather than filing bankruptcy it could make better financial sense to find a job, create a budget, and begin to repay your debts.
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