What are the Pros/Cons of Filing Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is one option for those who are in need of debt relief. It can help filers get rid of poverty and give them a fresh start. You will be able to start over by clearing all of your debts. But bankruptcy is a personal decision. Take the time to evaluate whether it’s right for you. This article explores the pros and cons of filing Chapter 7 bankruptcy.
What are the pros/cons to filing Chapter 13 bankruptcy?
Chapter 7 and Chapter 13 bankruptcy are both powerful debt relief options for folks in need of a fresh start. Chapter 13 bankruptcy has many advantages and disadvantages that Chapter 7. Chapter 13 may be right if you have an income that is large or non-exempt assets. Check out the article from https://bankruptcyhq.com/ to find out more about the pros and cons of filing Chapter 13 bankruptcy.
What are the advantages of filing Chapter 7 bankruptcy papers?
You can get immediate relief using the much-needed breathing spell
Your creditors will be protected once your case is filed with bankruptcy court. Filing bankruptcy triggers an automatic stay – or stop – on all collection actions. This means all phone calls, garnishments, and collection letters have to stop. Even temporary stops were made to repossessions, evictions and foreclosures.
Permanent debt relief via a bankruptcy release
Chapter 7 bankruptcy erases all types of debt. You are no longer required to pay this type of unsecured credit debt if the bankruptcy court grants you bankruptcy discharge.
It’s almost possible to get your bankruptcy relief
If you are honest and have passed the means test and have never filed bankruptcy, your bankruptcy discharge may be granted in as little time as 3 months. As long as you make sure you meet all requirements before and after filing your bankruptcy case, it’s basically automatic.
You’ll likely be allowed to keep all your stuff
The law protects exempt property from creditors in 95% of Chapter 7 bankruptcies. Whether that’s your monthly social security check, your watch, or your kitchen table, if it’s protected by an exemption, you get to keep it.
If you’d like, you can keep your vehicle even after bankruptcy filings
However, you’ll still be responsible for the car’s cost. Chapter 7 bankruptcy gives you the ability to get rid your car and to repay the loan. Here’s everything you need to know about keeping your car after filing Chapter 7 bankruptcy.
The bankruptcy filing does not mean that missed monthly payments or other negative marks are removed from your credit report. This will not impact your credit score.
A bankruptcy discharge grants you a clean slate, which is your opportunity to rebuild and increase credit scores. Most people are able to have a better credit score one-year after filing Chapter 7. This is compared to when they started the bankruptcy proceedings.
Access to Banking and Credit is Improved
You’ll get more credit card offers right after filing your bankruptcy than you’ll know what to do with. This will help you rebuild your credit, increase your credit score, and give you access to the safety net provided by a card.
What are the Cons to Filing Chapter 7 Bankruptcy
The Chapter 7 bankruptcy process is not right for everyone. Although it might seem like the best choice for you in terms of debt relief, there are some downsides to Chapter 7.
Chapter 7 can’t be filed if you make too many dollars
If you’re making less than the median income, you’re probably wondering how that’s even possible. You don’t have to worry about it. It is all about people with money that they can put into savings, after paying their main living expenses.
That’s called having disposable income and it’s calculated by the means test. You cannot simply walk away if you have too many disposable income. After completing a Chapter 13 plan, though, bankruptcy can be filed but not Chapter 7.
Even if you have great credit, it may take a temporary hit
Those that are able to maintain their monthly payments and keep their credit score high before filing their bankruptcy petition will see their score drop initially. But, a bankruptcy filing often does more good than harm to the filer’s credit score. After their bankruptcy discharge is granted they can start increasing that pesky credit score immediately.
It doesn’t remove all unsecured obligations
Some unsecured debts, like alimony or child support can never be discharged in bankruptcy. Filing bankruptcy is not an easy way to get rid of tax debts or student loans.
You can lose some types property
For a discharge of bankruptcy in a matter that takes a few months to complete, you will have to give up some very expensive items. Nonexempt property – the type of property the bankruptcy trustee can sell to pay creditors in a Chapter 7 bankruptcy case – is pretty rare.
If you own expensive property you don’t want to lose, it’s best to speak to a bankruptcy lawyer. That will help you determine whether Chapter 13 is a viable option and, if yes, how to proceed.
Chapter 7 bankruptcy filings do not provide protection for others
Chapter 7 bankruptcy does not eliminate your obligation or liability to pay the debt. It does not wipe out the debt for anyone else. Chapter 13 can only protect a cosigner. But, it only works because you ultimately pay the debt through your repayment program.
Filing bankruptcy can be expensive
Chapter 7 cases attract a $338 filing charge from the bankruptcy court. If you earn more than 150% of the federal poverty guideline, you have to pay this filing fee. If you are unable or unwilling to pay the whole fee in one go, you may file your case separately and pay the fees in four installments. But, if you don’t pay it in full, your case will be thrown out by the court.
You’ll need to pay attorney fees, as well as court filing fees, if you choose to work with a law office or bankruptcy lawyer. This amounts to approximately $1,500 which must be paid before your file is filed. You also have to pay the filing fee, and take the required credit counseling course.
Depending on your financial situation and the goals you want to accomplish with your bankruptcy filing, hiring the right bankruptcy lawyer for your case can be a great investment. However, many Chapter 7 cases are easy and can be resolved without the need for a lawyer.
BankruptcyHQ gives you the opportunity to file Chapter 7 bankruptcy completely free
BankruptcyHQ’s online app, which is completely free, can be used to help you navigate Chapter 7 bankruptcy. If your financial situation is a bit more complex, and BankruptcyHQ is not a good fit for you, it can help you find a bankruptcy attorney in your area.
Ready to move on? If so, take this short quiz to find out if BankruptcyHQ is a good fit for you. Don’t know how it works yet? Check out this 10-Step Guide on how to file bankruptcy for free. And feel free to browse our Learning Center to find answers to all of your questions!