Women & Money: When to File Bankruptcy

Chapter 7 and Chapter 13 should be your last resort

hefreeman01262Savvy money management skills are a necessity to weather these tough economic times. BlackEnterprise.com has got you covered with our supplement to the magazine’s three-part “Women & Money” series.

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: What advice do you have for women who might need to file for bankruptcy? And if they proceed with bankruptcy is there a right or wrong way to do it?

Harrine Freeman: Bankruptcy should be a last resort. You should only file for bankruptcy when you have exhausted all other options or in extreme cases such as long-term unemployment, long-term illness, or death of a spouse who had a large amount of debt.

Chapter 7 bankruptcy forgives all debt included in the bankruptcy, reports a zero balance on all accounts, and stays on your credit report seven years from the date of discharge. Chapter 13 bankruptcy sets you up on a repayment plan with your creditors and stays on your credit report for 10 years from the date of discharge. Filing for bankruptcy greatly lowers your credit score and can prevent you from getting approval in the future.

A benefit of bankruptcy is that as soon as you file the petition, your creditors are notified and are required to update the status of your accounts that were included in the bankruptcy on your credit reports. Filing for bankruptcy also prevents creditors from contacting you for payment. In some cases unscrupulous creditors may still contact you for payment, but you must  inform them that the account(s) are included in your bankruptcy filing.

You can file for bankruptcy if you meet the following conditions:

–You have resided in a state for at least 90 days prior to filing (this may vary in each state)

–You have a total unsecured debt of $290,525 or less or a total secured debt of $871,550 or less

–You attend financial counseling from a government approved agency within 180 days before you file for bankruptcy

–You provide a certificate indicating completion of the financial counseling course.

–If you earn more than the median income in your state and can repay at least $6,000 over a five-year period, you can file for Chapter 13.

If you make less than the median income in your state, you can file for Chapter 7 bankruptcy. Student loans, tax liens, child support, and alimony cannot be included when filing for bankruptcy.

You have two options when filing for bankruptcy: You can file on your own or hire a bankruptcy lawyer. If you file bankruptcy on your own, you can go to your state bankruptcy court to fill out the necessary paperwork. Do research at the library or online to find out the requirements in your state to file for bankruptcy. You will have to bring a copy of all of your debt, assets, monthly income, and monthly expenses. Create a budget of all of your

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