The thought of declaring bankruptcy often sends a chill down many people’s spines because of the negative consequences that can come when filing. However, sometimes declaring a Chapter 7 bankruptcy can be the smart thing to do. This is because the liquidation of your assets can help pay off debts that you would otherwise not have been able to handle.
It’s true that most individuals who declare bankruptcy do not have many assets to speak of. However, in some cases a person may have an investment property that can be used to pay off other debts which have accumulated over time.
For example, let’s say you own a house with a $100,000 mortgage, and you have built up an equity of about $20,000. You could sell this home for the full value and keep $20,000 for yourself in order to pay off other bills such as credit card debts, or any other financial obligations that have been overwhelming you.
If you were behind on your mortgage payments for this investment property, the bank could foreclose on the property. Granted, this can take several months to accomplish, but eventually the mortgage company can take over house because you have not made payments. Chapter 7 bankruptcy will not save your house from the mortgage company, because you still have to continue to pay off your house payments on a monthly basis. (Chapter 13 can actually help you restructure your mortgage if you are behind on payments, but that is another matter for a different article.)
What happens when they finally foreclose on the house? You could lose your entire investment and still not have covered your other debts. Bankruptcy can stop foreclosure before it happens and allow you to liquidate your assets. This can not only help you cover other debts including unsecured debts like credit card bills, but you could actually put money in your pocket depending on the amount of equity you had in the home versus the amount of debt you are trying to pay off.
For more information please visit: http://www.floridalawattorney.com