If you’re unhappy with your financial decision, it never hurts to learn more about Chapter 7 bankruptcy. As you come to better understand the benefits, you’ll find it easier to decide if this is the right way to escape many of your financial problems.
The primary benefit of Chapter 7 bankruptcy is the ability to discharge some or all of your debts, which provides you with a fresh start. However, there are also some drawbacks that you should consider as you prepare to go down this path:
- Income limitations: If you earn too much money, as calculated by the means test, you won’t qualify for Chapter 7 bankruptcy. At that point, you should turn your attention to the benefits of Chapter 13 bankruptcy.
- Your credit score will take a hit: A Chapter 7 bankruptcy filing remains on your credit report for 10 years. For this reason, you can expect your score to take a hit. On the plus side, if your credit score is already low, this won’t affect you much.
- Not all debts are discharged through Chapter 7 bankruptcy: For example, student loans, tax debts and child support payments won’t come into play. You’re still responsible for these debts in the future.
- No protection for others: For example, if you have joint debts with a co-signer, Chapter 7 bankruptcy only eliminates your obligation. It doesn’t do the same for them. If you want both of you to benefit from bankruptcy, Chapter 13 is the way to go.
- Not all property is exempt: Even though non-exempt property is rare, it can still be part of your Chapter 7 bankruptcy filing. If it is, you can expect to lose the property, as the bankruptcy trustee will sell it to pay back creditors.
Is Chapter 7 bankruptcy the right decision?
There’s no easy answer to this question, as it depends largely on your financial circumstances and ability to dig your way out of debt through other means.
If you’re considering Chapter 7 bankruptcy, it makes sense to learn more about the process and its impact on your future. This will help you decide what to do next.