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With the holiday season right around the corner, it is easy to overspend and end up in serious debt. Last week, we talked about how credit card debt can wreck havoc on your life. We discussed some ways to rein in holiday spending. Some of our Florida readers might be past the point of reigning in holiday spending. Those readers might be contemplating bankruptcy. Chapter 7 bankruptcy is one option that is on the table for some people. This type of bankruptcy has some very specific points that you must consider prior to filing.

What does Chapter 7 bankruptcy do to my property?

When you file Chapter 7 bankruptcy, you might lose some of your property. Each state has its own guidelines about what property is exempt from the bankruptcy. Any property that isn’t exempt from the bankruptcy will be taken by the court and sold to pay some of your debt. In most cases, however, you will be allowed to keep your home and a vehicle, as well as some other property. Learning about property exemptions and working with someone familiar with those guidelines might help you to understand how to take control of your debt.

What does it do to my credit?

When you file for Chapter 7 bankruptcy, you have to give up all your credit cards. While you might be able to get new credit cards in one to three years, you might realize that you can live without them after your bankruptcy. The Chapter 7 bankruptcy filing will remain on your credit report for up to 10 years. That mark on your credit report might make getting credit extended to you difficult; however, you will have a fresh start that takes the stress off of you.

Does it erase all of my debts?

No bankruptcy will eliminate certain types of debt. You will still have to pay a mortgage. Student loans, alimony payments and child support don’t go away when you file for bankruptcy. Paying off student loans and making your mortgage payments can help you to rebuild your credit, so not having those discharged will likely help you in the future.

Source: FindLaw, “Pros and Cons of Declaring Bankruptcy under Chapter 7” Nov. 21, 2014