What Are the Pros and Cons of Filing Chapter 7 Bankruptcy?

In a Nutshell Filing for bankruptcy offers a potent way to eliminate debt and get a fresh start. But, as with everything there are downsides to filing bankruptcy, excessively. Use this article to explore the advantages and drawbacks of chapter 7 bankruptcy .Attorney Andrea WimmerAttorney Andrea Wimmer Written by Attorney Andrea Wimmer. 
Updated December 12, 2021 chapter 7 bankruptcy is one of the most knock-down debt relief options available in the United States. It has helped many people get out of poverty and get a clean fiscal slate. It gives you a clean begin by erasing your debts. But filing bankruptcy is a personal decision and it ’ s important to fully consider whether it ’ s the right option for you. This article explores the pros and cons of filing chapter 7 bankruptcy.

What Are the Cons of Filing Chapter 7 Bankruptcy?

Filing a chapter 7 bankruptcy is not right for everyone. And even if it feels like the best debt relief option for you, it may not be once you consider some of the cons of chapter 7 .

You can’t file Chapter 7 if you make too much money.

If you ’ re making less than the medial income, you ’ re credibly wondering how that ’ s even possible. Don ’ thymine fret ; this is not about you. This is about folks who have money they can put into savings after paying their chief populate expenses. That ’ s called having disposable income and it ’ south calculated by the means test. Having besides much disposable income means you ’ re not eligible to plainly walk away from your debt. But, while you can ’ t file chapter 7, you can still get a bankruptcy drop after completing a chapter 13 repayment plan .

If you have good credit, it will likely take a temporary hit.

Those that are able to maintain their monthly payments and keep their citation seduce high before filing their bankruptcy petition will see their score dismiss initially. But, a bankruptcy charge frequently does more good than harm to the filer ’ second credit rating score. Plus, once their bankruptcy discharge is granted, they can begin increasing that annoying credit grudge immediately .

It doesn’t erase all unsecured debts.

Some unguaranteed debts, like alimony or child support, can never be discharged in bankruptcy. other things, like tax debts and scholar loans, can be quite hard to eliminate by filing bankruptcy .

You can lose certain types of property.

One of the trade-offs for getting a bankruptcy discharge in a topic of a few months is the necessity to give up certain expensive items. Nonexempt place – the character of place the bankruptcy trustee can sell to pay creditors in a chapter 7 bankruptcy case – is pretty rare. If you own expensive property you don ’ thyroxine want to lose, it ’ south best to speak to a bankruptcy lawyer. then you ’ ll know whether that ’ s truly a hypothesis and, if so, whether filing Chapter 13 is a better debt respite option for you .

Your Chapter 7 bankruptcy filing doesn’t protect others.

A bankruptcy filing under chapter 7 eliminates only your obligation to pay the debt. It does not wipe out the debt for anyone else. chapter 13 is the lone type of bankruptcy that can protect a co-signer, but that lone works because you end up paying the debt through your refund plan.

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What About Chapter 13 Bankruptcy?

chapter 7 and Chapter 13 bankruptcy are both powerful debt relief options for folks in motivation of a clean begin. But the pros and cons of filing chapter 13 bankruptcy are quite different than for chapter 7. If you have a high disposable income or non-exempt assets you want to protect, Chapter 13 may be right for you. Check out this article to find out more about the pros and cons of filing chapter 13 bankruptcy .

Filing Bankruptcy Can Be Expensive

The bankruptcy woo charges a $ 338 filing fee for chapter 7 cases. If you earn more than 150 % of the union poverty guidepost, you have to pay this file fee. It ’ s possible to file your casing and pay the fee in up to 4 payments if you can ’ t pay it all at once. But, if you don ’ deoxythymidine monophosphate pay up it in wax, your case will be thrown out by the court. If you hire a police tauten or bankruptcy lawyer to help you, you ’ ll have to pay their lawyer fees in addition to the court filing fees. That normally comes out to an average of about $ 1,500 that has to be paid before your case is filed. And that ’ s on top of the charge tip and the cost of taking the required credit rede courses. Depending on your fiscal situation and the goals you want to accomplish with your bankruptcy file, hiring the correct bankruptcy lawyer for your casing can be a big investment. But, a lot of chapter 7 cases are simpleton and can be successfully completed without a lawyer .

Let’s Summarize…

There are many things to consider when deciding whether to file bankruptcy. Your decision will greatly depend on your personal situation and what your goals are for your fiscal future. Check out the television below ⬇️ for more !

Sources:

  1. American Bankruptcy Institute. ( 2002 ). Bankruptcy by the Numbers – Chapter 7 Asset Cases. ABI Journal . Retrieved August 4, 2020, from https://www.abi.org/abi-journal/chapter-7-asset-cases
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