Before you make any decisions about filing chapter 7 bankruptcy, you must first know what chapter 7 bankruptcy is and whether or not it makes financial sense for you.
Chapter 7 bankruptcy is the most simple and most common form of bankruptcy used by individuals and small businesses. Under chapter 7 bankruptcy, debtors must gather all of their property and assets so that the bankruptcy court trustee can use that property and assets to repay creditors. Common assets and property utilized by the trustee include cash, investments, bank accounts, homes, land, boats, cars, and jewelry. After selling the property and assets, the trustee will release all further debts, excluding non-dischargeable debts, owed to creditors.
Questions to Ask Yourself When Considering Chapter 7 Bankruptcy
You need to ask yourself the following questions when considering chapter 7 bankruptcy.
- Are you unable to repay your debt, even under a modified repayment plan?
- Do you need relief from bothersome creditors quickly?
- Are most of your debts dischargeable (debts that don’t need to be paid under chapter 7 bankruptcy)?
- Are creditors allowed to take your property or income even if you don’t file chapter 7 bankruptcy?
- Will filing for chapter 7 bankruptcy relieve enough of your debt to make the process worthwhile?
- Will you be able to keep property that you don’t wish to give up?
If you answered yes to these, you may want to consider filing Chapter 7 bankruptcy. We’ve outlined the pros and cons of Chapter 7 bankruptcy so that you can better understand what it might entail.
Chapter 7 Bankruptcy
- Chapter 7 bankruptcy prevents creditors from aggressively going after your property and harassing you to collect what you owe them.
- The chapter 7 bankruptcy process usually takes only 3-6 months.
- You are allowed to keep some of your personal property and assets, but it will be up to the bankruptcy trustee to decide (based on the bankruptcy laws and what you owe creditors).
- You may be able to establish new lines of credit if creditors allow it. Any new credit cards or lines of credit will not be touched by the bankruptcy trustee.
- If you find yourself in financial trouble once again, you can file for chapter 13 (remember, under chapter 7 bankruptcy, you can’t file chapter 7 again for six years).
Chapter 7 Bankruptcy Cons
- You may lose assets and possessions that you wanted to keep.
- You will have your credit cards taken away.
- Bankruptcy will not relieve you from certain debts, such as alimony; child support; student loans; personal injury claims; or fines, penalties or forfeitures.
- Your Chapter 7 may be changed to a Chapter 13 if you have enough adequate disposable income to pay your debts over time.
- After bankruptcy, it may be difficult to convince mortgage companies to finance a home and convince landlords to rent to you.
- Bankruptcy can stay on your credit report for 10 years and will result in bad credit for quite some time.
- You can only file Chapter 7 bankruptcy once every six years (there are exceptions).
- You will need to take a course in personal financial management (debtor education course) before you can receive a chapter 7 discharge.
- Any new credit that you establish will likely be at much higher rates than prior to the bankruptcy.
Get Help with Your Chapter 7 Bankruptcy Process
It’s not easy to decide if Chapter 7 bankruptcy will be right for you. Your future credit, self-image, and possibly your personal or business reputation may be harmed. However, getting help from an expert can help you sort out what impact a Chapter 7 bankruptcy will have on your life. Should you avoid bankruptcy altogether, try to pay your bills, and deal with creditors? Or, should you file for bankruptcy and let the bankruptcy court deal with your creditors? Robert H. Solomon, PC, Attorneys At Law specializes in bankruptcy law. They can guide you as you sort through all the questions you have and help you through the process if you choose to file Chapter 7.