Consider the Consequences of Bankruptcy Filing
Filing for Chapter 13 or Chapter 7 is a last resort for those who are in debt over their head. Chapter 13 requires a payment plan in which you pay off all or part of your debt. Chapter 7 is a type of fresh start where your debts are wiped out and you are requied to rebuild your credit rating from scratch. In either case the burden of debt and legal action will be eased, but both have consequences that are important to understand prior to filing. Either Chapter 7 or Chapter 13 should be viewed as commitment. You are committing to payments and solving a problem, but on the other hand, you are also committing to several years of being viewed as a major credit risk. This means different things for individuals, but be sure to understand the consequences before filing. Cincinnati bankruptcy attorneys will explain your options and obligations before you reach a Cincinnati bankruptcy court. If either option is in your future, be sure you speak with your attorney considering all of the filing.
It is important to understand what, if anything, will change your taxes, should you choose to file. If you are used to receiving a refund at the end of the year, you may have to forfeit this. It is viewed as disposable income and you may end up losing 50% to 100% of the return. However, protection for this money is available. Another choice is to claim higher withholdings throughout the year. This gives you additional income through the year and creates a situation where you receive no refund. However, be sure to increase the withholdings without creating risk of taxes being due in April.
You can also protect your refund by placing the money into a retirement account throughout the year. While you will have less access to your monthly income, the money will be protected in a tax free account that is not vulnerable to creditor attack. This also enables you to plan for the future and it gives you something to look forward to following your debt release.
Filing Chapter 13 and Chapter 7 will affect your ability to get credit in the future. For up to a decade you may find yourself unable to get loans for vehicles or mortgages, and you may be denied unsecured credit like credit cards. It may creating difficulty finding a job, to open a checking or savings account, or to gain certain clearances affiliated with employment. If you plan to marry, it can reduce the options you share with your spouse concerning home ownership. They will be taking on some of the consequences of your filing, which is important to understand before you file.