While Chapter 7 is the most common form of bankruptcy, you should understand it thoroughly before you file. However, you may need to part with some of your most treasured assets to have the proceeds go to your creditors.
With Chapter 7 bankruptcy, you can get most of your debts discharged. It may be a good way to get a fresh start in your life if you qualify.
Who Can File for Chapter 7 Bankruptcy?
A person can be eligible to file for Chapter 7 if they have a lot of debt and little income or assets. If you’re a high earner, you may not qualify if your debts are mostly consumer debts. However, with the help of a bankruptcy lawyer, you may be able to file for this form of bankruptcy.
Legal representation helps because you must file the petition and stick with the proper schedules. This is where you will need to list all of your assets, debts, and recent financial history. According to Wonais Law, LLC, this step is the most important and time-consuming portion of the filing.
Before you consult an attorney, you should know the advantages and disadvantages you face when you file for Chapter 7.
Advantages of Filing for Chapter 7 Bankruptcy
One of the key advantages of Chapter 7 bankruptcy is that it can give you a fresh start. Debt relief is by far the biggest reason for filing, as it can relieve people’s financial burdens. With it, you can discharge most of your unsecured debt, such as medical bills, credit cards, and personal loans.
Once you file, you will no longer be chased by creditors. They can’t file any lawsuits against you, garnish your wages, or call you. You also won’t need to worry about repossessions or debt collections anymore.
Disadvantages of Filing for Chapter 7 Bankruptcy
While there are advantages to filing for Chapter 7 bankruptcy for those drowning in debt, there are also disadvantages. The biggest one is the impact it will have on your credit score. Bankruptcies stay on your credit report for ten years, making it much more difficult to apply for credit. You may not be able to buy a house, take out a student loan, or apply for a credit card for a long time.
Certain debts can’t be eliminated, which means you will still need to take care of them. Alimony, child support, student loans, and tax liens don’t disappear when you file for Chapter 7 bankruptcy.
Since some of your assets may be liquidated to pay off your debts, you may lose some things that are important to you. These items are nonexempt, which means you will most likely get to keep the things you need to get by. Luxury items are always the first to go, so if you have a vacation home or a second car, these will be sold by the trustee.
It’s also important to note that filing for bankruptcy isn’t free. You will have to pay a filing fee and any additional actions on your case. You’ll also be required to take a credit counseling course and a financial management course, which comes at an additional cost.
Some people try to save money by attempting to file for bankruptcy on their own, but this is ill-advised. Bankruptcy attorneys know how to get through this confusing process without making mistakes that could cost you more. It’s a smart move to speak with a lawyer when you’re considering Chapter 7 bankruptcy to get out of debt and find out if it may be the best course of action in your situation.
