Pros and Cons of Filing Chapter 7 Bankruptcy
In the United States, Chapter 7 bankruptcy is one of the most powerful debt relief options. It can assist customers in escaping poverty and giving them a fresh start. It allows you to start again by wiping your debts. However, bankruptcy is a personal choice, and you should carefully examine if it is the best option for you. The advantages and disadvantages of Chapter 7 bankruptcy are discussed in this article.
What are the Benefits of Filing for Bankruptcy under Chapter 7?
An immediate sense of relief in the form of a much-needed breathing spell
You are protected from creditors as soon as your bankruptcy case is filed with the bankruptcy court. When you file for bankruptcy, all collection operations are automatically halted. All phone calls, garnishments, and collection letters must cease immediately. Repossessions, evictions, and foreclosures were all put on hold for the time being.
A bankruptcy discharge provides permanent debt relief.
Most sorts of debt, including credit card debt, medical bills, and personal loans, are erased when you file Chapter 7 bankruptcy. When the bankruptcy court grants you a bankruptcy discharge, you no longer have to pay these sorts of unsecured debts.
It’s almost certain that you’ll get your bankruptcy discharged.
You can achieve your bankruptcy discharge in as short as three months if you’ve never filed bankruptcy before, pass the means test, and act honestly with the bankruptcy court and the bankruptcy trustee. It’s virtually automatic if you make sure you meet all conditions before and after filing your bankruptcy petition.
You’ll almost certainly get to keep all you own.
More than 95 percent of people who file Chapter 7 bankruptcy in the United States keep everything they own. This is because certain property, known as exempt property, is protected from creditors under the law. If it’s covered by an exemption, you get to retain it, whether it’s your monthly social security check, your watch, or your kitchen table.
You can even keep your car after filing for bankruptcy if you want to.
You’ll still have to pay for it, but isn’t that just? If you don’t want to keep it, though, Chapter 7 bankruptcy permits you to walk away from both the car and the loan! Here’s all you need to know about preserving your car after declaring bankruptcy under Chapter 7.
Missed monthly payments and other negative entries on your credit report no longer affect your credit score after bankruptcy.
When your bankruptcy is discharged, you will be given a clean slate on which to rebuild your credit and raise your credit score. One year after filing Chapter 7, the majority of folks have a higher credit score than they did when they first started the bankruptcy process.
Improved Credit and Banking Access
You’ll get more credit card offers than you know what to do with shortly after you file for bankruptcy. This will not only assist you in rebuilding your credit and increasing your credit score, but it will also provide you with the security net that comes with owning a credit card in the event of an emergency.
What are the Disadvantages of Chapter 7 Bankruptcy?
Filing for bankruptcy under Chapter 7 is not for everyone. Even if it appears to be the best debt relief choice for you, once you consider some of the disadvantages of Chapter 7, it may not be.
If you earn too much money, you won’t be able to file Chapter 7.
If you earn less than the median income, you may be perplexed as to how this is even feasible. Don’t be concerned; this isn’t about you. This refers to people who have money left over after paying their basic living needs.
The means test determines whether or not you have disposable income. You won’t be able to simply walk away from your debt if you have too much disposable income. While you won’t be able to file for Chapter 7, you will be able to acquire a bankruptcy discharge if you complete a Chapter 13 repayment plan.
If you have good credit, it will almost certainly suffer a temporary setback.
Those who are able to make their monthly payments on time and maintain a high credit score before filing for bankruptcy will notice their score dip at first. However, a bankruptcy filing frequently benefits the filer’s credit score more than it hurts it. Plus, after their bankruptcy is discharged, they can immediately start working on improving their credit score.
It does not completely eliminate all unsecured debts.
Some unsecured debts, such as alimony and child support, are not dischargeable in bankruptcy. Other debts, such as tax debts and student loans, can be difficult to discharge in bankruptcy.
Certain forms of property can be lost.
The obligation to give up certain pricey objects is one of the trade-offs for achieving a bankruptcy discharge in a handful of months. Property that is not exempt from the bankruptcy trustee’s ability to sell to pay creditors in a Chapter 7 bankruptcy case is uncommon.
If you hold valuable property that you don’t want to lose, you should consult a bankruptcy attorney. Then you’ll know whether that’s a real possibility for you, and if it is, whether filing Chapter 13 is a better debt relief choice.
Others are not protected by your Chapter 7 bankruptcy filing.
Only your obligation to pay the debt is eliminated when you file for Chapter 7 bankruptcy. It does not relieve anyone else of their debt. The only sort of bankruptcy that can protect a co-signer is Chapter 13, but that only works if you pay off the debt under your repayment plan.
What are the advantages and disadvantages of filing for Chapter 13 bankruptcy?
For those in need of a fresh start, both Chapter 7 and Chapter 13 bankruptcy are viable possibilities. However, the benefits and drawbacks of Chapter 13 bankruptcy differ significantly from those of Chapter 7. Chapter 13 bankruptcy may be ideal for you if you have a lot of disposable income or non-exempt assets you want to protect. Learn more about the benefits and drawbacks of Chapter 13 bankruptcy in this article.
Bankruptcy is a costly process.
For Chapter 7 cases, the bankruptcy court imposes a $338 filing fee. You must pay this filing fee if your income exceeds 150 percent of the federal poverty level. If you can’t pay the amount all at once, you can file your case and pay the charge in up to four installments. However, if you do not pay it in full, the court will dismiss your lawsuit.
You’ll have to pay their attorney fees in addition to the court filing expenses if you employ a law firm or a bankruptcy lawyer to assist you. This normally amounts to around $1,500, which must be paid before your case can be filed. This is in addition to the filing fee and the cost of the required credit counseling classes.
Hiring the correct bankruptcy lawyer for your case might be a wonderful investment depending on your financial condition and the goals you want to achieve with your bankruptcy petition. However, many Chapter 7 cases are straightforward and can be finished without the assistance of a lawyer.
Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale
Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.
*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.