When a Minnesota resident is having serious financial problems, he or she may start exploring debt relief options. Perhaps you’re currently in a situation like this. If so, you might be looking at Chapter 7 bankruptcy as a possible way to resolve your financial trouble.
As you navigate bankruptcy proceedings, you might encounter several phrases that can have a significant impact on your case. Understanding these terms helps obtain much-needed information that may influence your decisions. Remember that some things can work in your favor during bankruptcy; others do not. Knowing the difference between the two can help you achieve a positive outcome.
Beware of negative equity if you’re filing for bankruptcy
Equity is the amount of money that is the difference between what you owe on a home mortgage and the current market value of the home. If you have a lot of equity, it works in your favor as an asset. However, if you owe more than your home is worth, you have negative equity. In bankruptcy, this works against you as an unsecured debt.
Pay-as-you-go to keep your vehicle
Some people hesitate to file for Chapter 7 bankruptcy because they think they will lose their biggest assets, such as their home or vehicle. Understanding the pay-as-you-go system may alleviate your fears regarding your vehicle. This system is beneficial because it enables you to keep your car while navigating bankruptcy proceedings.
You simply keep making auto loan payments. Then, if you encounter additional financial problems after bankruptcy, you can turn the vehicle in without penalty. If that does happen, all is well and good. You keep the car. If you are making payments, even though the court discharged the loan through bankruptcy, you may keep the vehicle.
Review state laws for exemptions
Another common bankruptcy term is “exemptions.” If a specific asset is exemptible, you can retain it, even if it is an asset you could otherwise liquidate. In some cases, this might include your vehicle or even your home. Because every state has its own guidelines and requirements regarding bankruptcy exemptions, it’s best to research the laws of your state before filing a petition so you know what to expect.
Throughout Minnesota and beyond, many people have hesitated to take advantage of bankruptcy as a valuable financial tool because they did not fully understand how it works nor what they’d be able to achieve by filing a petition. If you explore the options that might be available to you, you might discover a way to not only alleviate debt, but to restore financial solvency in less time than you might expect.