Why It’s Dangerous to File Chapter 7 Bankruptcy if You’re Behind on Secured Debts

By , Posted on Oct 24, 2019
bankruptcy
bankruptcy

MY HUSBAND DIED AND I GOT INTO TREMENDOUS CREDIT CARD DEBT PAYING FOR HIS MEDICAL EXPENSES AND FUNERAL COSTS. CAN YOU HELP ME?

TAIEBLAW has helped over 7,000 people over the last 34 years.

The majority of people who end up filing for bankruptcy do so for circumstances outside of their control.  Life is not a straight road and unfortunately bad things happen to good people.

This is why the whole purpose of the bankruptcy code is to help honest people get a fresh start.

In this situation, the client fortunately was current on her condominium and mortgage payments and her home had minimal equity.  Thus, she was eligible for a Chapter 7 where she could walk away from her debt and get a fresh start.

However, if she was behind on her mortgage payments or if her home had too much equity, then she would have had to reorganize to save her home.

The Danger of Filing for Chapter 7 Bankruptcy

Many people don’t realize that if you file a Chapter 7 bankruptcy and your home has too much equity, a Chapter 7 trustee could sell your home to pay the non-exempt equity to your unsecured creditors.

Thus, if you are just overwhelmed with credit card debt and all your property is exempt or protected, you would be eligible to file Chapter 7 to get a fresh start.  However, if you are behind on secured debts such as a mortgage or car loan, it is extremely dangerous to file Chapter 7 since you are facing the prospect of losing your vehicle or having the mortgage company begin foreclosure.

You must be very careful if you erroneously file Chapter 7 since a Chapter 7 case cannot be voluntarily  dismissed as with most Chapter 13 cases. You would have to file a motion to convert to Chapter 13, which may create some legal issues if the Chapter 13  is not successfully completed.

Questions? Get in Touch

If you have any questions concerning any type of bankruptcy filing, please contact TAIEBLAW at 856-235-4994 or visit our website at TAIEBLAW.COM

Steven N. Taieb, Esq. has been a South Jersey Bankruptcy Attorney for over 34 years and is board certified in consumer bankruptcy law by The American Board of Certification which is accredited by The American Bar Association. 

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