There are many options for people who need help with debt, but not everyone knows about all of them. One option is Chapter 7 bankruptcy, which can have both benefits and drawbacks depending on your personal situation.
To learn more about the pros and cons of filing for Chapter 7 bankruptcy, read this article to find out what it entails and how it may affect you financially in the future.
Chapter 7 bankruptcy is the most common form of filing for bankruptcy. At its core, Chapter 7 bankruptcy means liquidating some or all of your assets to pay back as much debt as possible.
This type of bankruptcy has many benefits including not having to repay any dischargeable debts. However, this type of bankruptcy does come with drawbacks. You could lose anything that isn’t exempt from being sold off through liquidation or sale under law.
One major benefit to filing for Chapter 7 bankruptcy is there is no need to repay dischargeable debts. Additionally, Chapter 7 bankruptcies can help people who don’t qualify for other debt-relief options, such as a Chapter 13 bankruptcy.
One other significant benefit to filing for Chapter 7 bankruptcy is that you will not be required to endure a potentially long repayment period. Chapter 13 bankruptcy filers may be required to repay their debts in anywhere from three to five years. While people who file for Chapter 7 bankruptcy typically only have to wait around four months.
One drawback to filing for Chapter 7 bankruptcy is that there are certain exemptions you are allowed when it comes to liquidating your assets. For example, if a person has an exemption on their house in the amount of $75,000, they can keep it no matter how much their home is worth. If a person has an exemption on their house in the amount of $45,000 and there’s nothing else they can do to their home to lower its market value, it will be sold by law because this is less than half of what they could legally keep if they did not file for bankruptcy.
Another drawback to filing for Chapter 7 bankruptcy is that you could lose anything that isn’t exempt from being sold off through liquidation or sale under law. For example, if someone has $10,000 worth of personal property to be liquidated and the state limits this to what they can keep to around $4,000, it will likely end up being lost because it is the least valuable asset to be liquidated.
Chapter 13 bankruptcy requires that all disposable income works toward paying off creditors. For example, if the person filing has $25,000 worth of debt and $1,500 in disposable income, they will pay $250 a month until the debt is repaid. Chapter 13 can be a less stressful way to repay debts, but it’s also more expensive.
If you are thinking about filing for Chapter 7 bankruptcy, it’s a good idea to speak with an attorney. For example, if you have more than $6,000 in unsecured debt and less than $175,000 worth of assets that can be liquidated under the law, you would qualify for Chapter 7 bankruptcy. An attorney can help you determine if this is the best course of action for your specific situation.
Chapter 7 bankruptcy is a way to repay your debts and get back on track financially. It’s important that you do your research before making this decision, as there are some drawbacks. They include losing some of what you have, depending on the exemptions in place where you live. If Chapter 7 doesn’t seem like it will work for your situation, speak with an experienced bankruptcy attorney. They can suggest other options, such as Chapter 13 bankruptcy.
Credit scores impact more of our lives than we’re aware of, from getting a loan to renting or buying a home. If you’re thinking of filing for Chapter 7, it also impacts your credit score. Your credit score can range from 300 to 850, with the average US consumer having a score of 697.
A bankruptcy filing will affect your credit score for up to 10 years, depending on how long since your case. If you plan on applying for loans or rental properties within that timeframe, this is something to keep in mind.
The further your bankruptcy filing falls within this 10-year timeframe, the less it will impact your credit score. For example, someone who filed for Chapter 7 bankruptcy four years ago will have a much lower impact on their credit score than someone who filed two years ago.
Another thing to consider is that your score will naturally go up over time. Because it’s past due, negative information like this doesn’t matter as much to creditors once it becomes older.
Before filing for Chapter 7, it’s important to know the benefits and downfalls, and if this is a feasible option. If all of this information makes deciding difficult, speak with an experienced attorney who specializes in bankruptcy law.
They may be able to help you navigate these complicated laws so that they work better for your specific situation. All without impeding your future plans or goals.
It’s important to hire an experienced bankruptcy attorney when you’re considering filing for bankruptcy.
This is because there are many different types of bankruptcy. Only a lawyer with experience will know which one would work best for your specific situation.
It might seem like it makes sense to do this yourself, but the reality is that most people don’t have the time or patience to understand all of the details involved in each type of bankruptcy. That means they make mistakes by not choosing the right type, or by not filling out paperwork correctly – both things could lead to delays in getting your case approved and ultimately hurt your chances of getting any debt relief at all.
This is not a journey to take lightly, but it is also not one to take alone. If you need to file for bankruptcy, reach out to us today to start your journey with us.
If you want to learn more about the options you have, call The Jax Law Center for a free consultation.
Parker and DuFresne