What The Modern Bankruptcy Debtor Should Know About Chapter 7 Protection

Even for those Americans who have reached their wit's end trying to figure out any tactics able to properly compensate their credit card debt accounts or other outstanding loan balances, its no secret that Chapter 7 protection has suffered through a raft of changes over the past decade. The new regulations, it's true, seem to go out of their way to penalize a bankruptcy debtor who ran into trouble with personal finances for one reason or another, and it's far from a faith accomplice that any claimants would be able to qualify for the Chapter 7 program, regardless of outstanding consumer debt totals.

Just opting to employ the state program of exemptions designed by your local legislature instead of the more streamlined national variant could hold untold dangers. Deciding to throw your household's future security behind the peculiar shape and sensibility that guides the protections wielded by your own state of residence might initially seem like a crafty way to safeguard a piano of considerable value, say, by exploiting the stranger traditions of areas of the country that have seen fit to render exempt all musical instruments from the clutches of the trustee, regardless of the potentially substantial worth. For such extremely specific purposes, the bankruptcy debtor looking after his estate may rashly avoid the national guarantees only to later discover that the slowly updated and far from rational local exemptions failed to cover vehicles, for another example. By such an over eagerness or even a genuine misreading of the applicable statutes, they leave themselves open to far greater losses, perhaps even the family homestead given sufficient equity valuations.

If we have learned anything as a nation over the past few years from the recession and subsequent financial near collapse – partially caused by consumers trying vainly to avoid modern bankruptcy through second mortgage consolidation loans – there should be a universal recognition of the dangers that equity lines of credit can represent. If you've run into trouble with bills, the least productive strategy would be exacerbating the onus of the mortgage payment, especially if you're largely trying to avoid bankruptcy. Short term solutions to intricate problems generally just make matters worse, and there's virtually no rationalization imaginable for avoiding bankruptcy declaration due to fears of property seizure or credit rating dissolution if you're willing to risk the loss of your primary residence (foreclosure proceedings last as long on credit reports and have significantly more deleterious effects in real terms than the somewhat overblown FICO dip from bankruptcy debtor scores).

Upon the same topic, monetizing IRAs or other annuities just to spare your family the stigma of bankruptcy appears nearly as foolhardy and, considering the credit card companies are forbidden by law from seeking access to those funds during attempts at recompense, equally purposeless. If we are going to be thoroughly frank, many Americans so desperate to find some other alternative from bankruptcy do so upon some level, even if it is not entirely conscious, because they don't wish to surrender the credit card accounts that originally led them to such an impasse. Right or wrong, the federal statutes will force the bankruptcy debtor to at least temporarily deal with the true culprit behind unsettled consumer finances, and, more importantly, the structure of Chapter 7 protection would not allow the troubles to worsen.