Many people are still convinced that although your credit will be affected for the next seven to ten years, bankruptcy will allow you to free yourself from any debts you cannot pay back. This is in fact not always true. In some cases you will have to pay back your debts eventually, even if you do file a Chapter 7, known as straight bankruptcy. This is the bankruptcy option that uses your property or assets to pay off your debts by liquidation. Although, many think that with this proceeding you will be clear from your debts, it is likely that you will have to pay off at least a part of your debts sooner or later.
Such will be the case if you belong to one of the following categories:
If your income is higher than the average income in your state. If you do earn more than the average person, you will have to opt for the Chapter 13 bankruptcy plan, in which the court will order you to hand over your income to a trustee appointed by the court. The trustee will then pay your creditors with this income. In most cases you will not have the choice of your expense management, for the court may order you to avoid the extra expense and pay the creditors instead.
If the creditors can prove that your intentions were fraudulent, you will have no choice but to pay off your debts. They may be able to prove that you had no intention of paying them in the first place.
If you own assets, such as a car or house, the bankruptcy court may oblige you to sell these assets to pay back your debts. This may also be the case of any investment you may have. Here too, you will be forced to cash in your investments to pay back creditors.
In the event you possess a second home or vehicle then these will definitely have to be sold to pay off your creditors.
However, there are some restrictions that will safeguard debtors and you may not have to sell your house or car, but these are best explained by an expert in financial counselling. A bankruptcy lawyer can also advise you on the strategies to adopt and options to choose from, offering the best advice for your financial predicament. It is always advisable to seek the counselling of experts if you want to solve your debts and financial problems in the best possible way and avoid filing for bankruptcy.