Pros and Cons of Filing Chapter 7 Bankruptcy
When it comes time to make the decision to file chapter 7 bankruptcy, it is best if you are aware of the pros and cons associated with doing so. While chapter 7 bankruptcy definitely has some fast advantages, you may find that the disadvantages associated with a chapter 7 filing far outweigh the advantages. That being the case, you may discover that filing chapter 7 is not right for you and that you will have to choose a different bankruptcy filing option.
Chapter 7 bankruptcy is ideal for consumers that have amassed a tremendous amount of debt; this type of filing permits the consumer to wipe the slate clean and literally start over. All eligible debts are essentially released and the consumer is no longer obligated to pay for the debts that are eligible for a chapter 7 filing. In addition, there are no limitations placed on how much debt you can wipe out when filing bankruptcy, however, certain kinds of debts do not qualify. What’s more, when filing this form of bankruptcy, you will find that the entire affair takes no more than six months time; with other forms of bankruptcy you could wind up paying off your debts for a period of years.
While this may seem like a fast solution to one’s debts, it is not without some major disadvantages. First, if the consumer has any significant assets of value, he or she may lose such assets. When filing chapter 7 bankruptcy if you own a car or home, the court may force you to sell such items. The monies gained are then put toward any existing debts. What’s more, you may have to actually qualify for chapter 7 bankruptcy in order to file. If you make a certain amount of money and a court feels that you can satisfy some kind of payment plan, you may have to file a totally different form of bankruptcy where you are required to pay your debts over a planned period of time.
Some debts cannot be wiped out when filing chapter 7 bankruptcy; these include student loans. If you have a tremendous student loan debt and no other debts to consider, then filing bankruptcy is not an option you can use to get your debts under control. You will have to talk to the creditor holding your student loan debt and work out some kind of repayment plan if possible. You might want to consider requesting a forbearance, a loan deferment, or you might also consider requesting a payment plan that is income based.
After filing chapter 7, you are no longer responsible for debts deemed eligible under your chapter filing. However, if you happen to have had any cosigners on different loans, the lenders will pursue them for your unpaid debts. This can cause bad relationships between you and the cosigner. You may want to work out a repayment plan for debts involving cosigners so that the debts you should be held responsible for do not fall into the hands of another.
One of the biggest disadvantages that chapter 7 bankruptcy filing has is the major damage it does to your credit rating. When filing this particular form of bankruptcy you might have grave difficulty getting more credit in the future. You can face such difficulties for seven to ten years time. You will want to carefully reflect on how this major move changes your credit rating before making the decision to file.
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