The decision to file for bankruptcy is an extremely difficult one. Bankruptcy can potentially hurt your credit, your reputation, and even your future. Filing for Chapter 7 bankruptcy can be damaging, but it may also provide some relief and solutions to get your finances back in order. Because of this, the bankruptcy lawyers at Groce & DeArmon want to talk about the advantages and disadvantages of filing for Chapter 7 bankruptcy to help you make the right decision.
Your Credit Could Take a Hit
One major disadvantage of Chapter 7 bankruptcy is that your credit score can go down significantly, especially if your credit was previously at a 700 or higher. In addition, a history of bankruptcy can remain on your credit report for up to 10 years. However, if you have poor credit, like most people who choose Chapter 7, your credit may actually improve.
You May Lose Some Property
Depending on what state you live in, you may lose valuable property such as a car or a house in order to repay your debts. Some property may be listed as an exemption and can be protected in Chapter 7 bankruptcy.
Not All Debts Will Be Erased
If you file bankruptcy, it will generally only erase tax debts that are over 3 years old. Debts like student loans can not typically be erased, but in rare instances of undue hardships, they may be included. Keep in mind that proving that your student loans are causing you undue hardship is a difficult task that requires consulting with a bankruptcy lawyer.
When you file for bankruptcy, something called an automatic stay goes into effect. This prevents lenders from collecting their debts during a specific amount of time. In Chapter 7 bankruptcy, the automatic stay can last for as little as 30 days.
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It Can Improve Your Credit
Since Chapter 7 bankruptcy is meant to erase many types of debt, it can actually help improve your credit score if it was below 600 before filing. There are many ways to start rebuilding credit after bankruptcy, like budgeting or signing up for a secured credit card. Lenders will be more likely to offer credit to those who have successfully completed Chapter 7 bankruptcy.
You Can Avoid Wage Garnishment
If you are behind on loan payments, creditors may try to get the money they lost back through wage garnishment. This is a court order that allows creditors to regain money lost by taking a portion of your paycheck. When you file for Chapter 7 bankruptcy, the automatic stay will prevent wage garnishment and ultimately improve your income.
Related Post: Pros and Cons of Filing for Chapter 13 Bankruptcy
Filing for Chapter 7 Bankruptcy
If you are thinking about filing for Chapter 7 bankruptcy, it is important to consult with a trusted bankruptcy attorney to make sure you are making the right choice. Shari DeArmon at Groce & DeArmon has worked on Chapter 7 and Chapter 13 cases in the Springfield, MO, area for over 30 years, and she can help you make the right decision. To get started, schedule a free consultation or call us at 417-862-3706 for more information.