Are you tired of creditors harassing you for past due payments? Has your debt become crippling? You need to find options for financial relief. Chapter 7 bankruptcy may be the right solution for you. However, there are advantages and disadvantages to filing for this type of bankruptcy that you need to know. Learn about these and if Chapter 7 is the right option for you.
Pros of Chapter 7 Bankruptcy
Some of the top advantages of filing Chapter 7 can include:
- Get rid of debt: You can eliminate your unsecured debt during a Chapter 7 bankruptcy, including your credit cards, medical bills, some loans, and other bills. Unlike in some other types of bankruptcy, Chapter 7 is open to all individuals, self-employed workers, and businesses. There also is no maximum limit of debt.
- Avoid repossessions: When you file for bankruptcy, a stay is enforced on all collections. This means any creditors must stop harassing you for payments. They must also end any lawsuits, wage garnishments, repossessions, and other actions to try to recover the debt from you.
- Path to rebuild your credit: When you’re drowning in debt, your credit score can be impacted. Filing Chapter 7 will make it difficult to qualify for credit – initially. A Chapter 7 bankruptcy will stay on your credit report for 10 years. However, after a while, your credit score will start to rise and over time your bankruptcy will have less of an impact on creditors.
- Fast process: A Chapter 7 bankruptcy is a relatively fast process. It could be finalized in four to six months. This means your debt can be off your shoulders and creditors can stop harassing you in just a few months.
Cons of Chapter 7 Bankruptcy
As is the case with all forms of bankruptcy, there are some risks you need to be aware of when filing Chapter 7:
- Harsh effects on credit score: Filing Chapter 7 bankruptcy can damage your credit score for 10 years. This can make it difficult to apply for credit, meaning you may have to wait to buy a house or even apply for a credit card, for a decade.
- Not all debts are cleared: While bankruptcy can clear a lot of your debts, it will not wipe out everything you owe. You can still be responsible for paying child support, spousal support, taxes, student loans, and others.
- Loss of property: One of the major differences between Chapter 13 and Chapter 7 bankruptcy is how property is handled. In Chapter 13, you have an option to retain your property by paying off your debts through a repayment plan. In Chapter 7, your assets are liquidated, meaning your nonexempt property is sold off to repay debts.
- Payment of fees: You will need to pay a filing fee and other administrative fees when filing federal bankruptcy. While you can pay these in installments, the final payment must be made 120 days after submitting the petition. If you fall below a certain income threshold, you can try to have these fees waived.
- Prove your income: You may need to take a means test to prove your income falls below a certain level and that you’re in a financial position that requires you to file bankruptcy. If you make too much money, you can pursue Chapter 13 bankruptcy instead.
Contact a Chapter 7 Bankruptcy Attorney
If you are considering filing bankruptcy to cope with mounting debt, it’s crucial to hire an experienced attorney to help you through the process. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review. We are ready to help you!