If you are one of the many Washington residents who is facing a debt judgment, you may be considering bankruptcy as one of your financial options. Experts say that bankruptcy is often referred to as the "nuclear option," which means that it completely wipes out your debt and effectively ends creditor harassment. Although this may sound like a process that would benefit nearly anyone, bankruptcy does come with some challenges. Washington residents are encouraged to carefully consider whether Chapter 7 or liquidation bankruptcy would truly benefit their finances.
First, it is important to understand the difference between Chapter 7 and Chapter 13 bankruptcy. In Chapter 7, most unsecured debts can be completely wiped out. These include debt judgments that have been levied against you by creditors. Some of your property could be sold off if it does not fall under federal and state bankruptcy exemptions -- you are allowed to keep your wedding ring, for example, and tools of your trade, among a wide variety of other assets. Chapter 13 does not wipe out debt, but rather restructures payment plans to place a smaller burden on filers.
Studies show that although bankruptcy could actually benefit more people, some consumers are unable to afford the process, and so they continue to needlessly suffer. Bankruptcy will also be visible on your credit report for about a decade.
There are many benefits to filing Chapter 7 bankruptcy. Before jumping into this decision, however, clients are encouraged to carefully assess their assets. This can help determine whether such a proceeding could actually improve their financial situation.
Source: Fox Business, "Debt Judgment May Trigger Bankruptcy" Fred O. Williams, May. 07, 2014