Chapter 7 Bankruptcy
Deciding whether or not to file for bankruptcy for your debt is a hard choice to face. In some situations, it may seem like the only way out of debt. Filing Chapter 7 bankruptcy will improve short-term quality of life, but it can also damage your future credit as well as your reputation. There are both good and bad outcomes when you file. Filing this chapter of bankruptcy provides for liquidation of nonexempt property and distribution of goods to debtors. Let’s go over the good and the bad results of Chapter 7 bankruptcy in more detail:
The Bad Outcomes or “Cons” of Chapter 7 Bankruptcy
Here are some of the downsides of filing for Chapter 7 bankruptcy:
If you do file Chapter 7 bankruptcy, it will stay on your credit score for some time. It can remain on your credit report for up to a total of 10 years. This may make it harder to get approval for anything from a car purchase to a small bank loan.
You can lose property that you own that is not protected by bankruptcy exemptions, and that property could be sold by the bankruptcy trustee. You may also lose your luxury possessions if not protected by an available exemption.
You may lose all of your existing credit cards.
Filing for Chapter 7 bankruptcy may make it more difficult to get a mortgage if you do not already have one.
Making the decision to declare bankruptcy right now might make it harder to do so later should something worse come along. Example: If you complete a filing for Chapter 7 bankruptcy, you cannot declare Chapter 7 again for eight years. This eight-year countdown begins from the date you last filed.
Bankruptcy filing will not relieve you of your responsibility to pay alimony and/or child support.
Filing Chapter 7 bankruptcy will not eliminate most of your student loan debt.
You may still be obligated to pay some of your debts, such a mortgage lien, even after your bankruptcy proceedings have been completed.
If you file Chapter 7 bankruptcy for relief but have an excess of income at your disposal, the court may request you to convert your case from a Chapter 7 to a Chapter 13. Doing this would change your plan to be free from most debts within four to eight months to a plan that would require you to repay your debts over the course of three to five years.
The Good Outcomes or "Pros" of Chapter 7 Bankruptcy
Now let’s go over some of the benefits of filing for Chapter 7 bankruptcy:
Even though a bankruptcy stays on your credit for years, the time to complete the process under Chapter 7 bankruptcy usually takes only 3-6 months. If you decide against filing for Chapter 7 bankruptcy when necessary, it could lead to missed debt payments, defaults, and lawsuits hurting your credit further. This situation may be more complicated to explain to a future lender than bankruptcy.
Most states have generous exemptions that allow you to keep a lot of what you own. Sometimes the exemptions allow more coverage to keep your property than you actually need. You also get to keep the salary you earn and the property you buy after you file Chapter 7 bankruptcy.
You might also be able to get new lines of credit within a time frame of one to three years after filing bankruptcy, but it may be credit with a higher interest rate.
There are lenders out there that specialize in lending to bad risks. This may seem like an unfair tag to put on someone who has taken a step in solving financial issues, but you can use one of these lenders if you need to.
Yes, you can only file Chapter 7 bankruptcy once every eight years, but you can always file a Chapter 13 if another issue hits you before that eight years is up. You can file a Chapter 13 four years after filing a Chapter 7.
Filing for bankruptcy will get rid of many of your financial obligations, including some Internal Revenue and Franchise Tax Board debt. However, keep in mind that only a family court order can suspend alimony or child support responsibilities.
If you have filed for bankruptcy, it will prevent your lenders from aggressive collection, meaning the daily phone calls will cease and the letters will stop arriving in the mail.
If you received a Chapter 13 discharge in good faith after paying at least 70% of your unsecured debt, the eight-year bar to file a Chapter 7 does not apply.
If you do not owe money on any type of debts that survive your bankruptcy, the amount as well as the number of debts that a bankruptcy court can relive you from paying can be unlimited.
Filing for Chapter 7 bankruptcy does not require that you need to have debts of any certain amount in order to file for relief. If even your case gets converted to Chapter 13, it can still improve your finances by giving you more time to pay off your debts. With Chapter 13, you get to keep all of your property as well.
Sometimes the best advice a bankruptcy attorney can give a client is not to file a bankruptcy. So be careful when hiring a bankruptcy lawyer who boasts about how many bankruptcy cases he or she files and/or ignores other possibilities for your situation.
Looking into bankruptcy options comes with many considerations, and you will need to look at every consequence to decide what is best for you and your assets. You should contact an experienced attorney to discuss your situation and learn more about how the bankruptcy laws can help you in your financial troubles. If you have more questions for bankruptcy in the state of California, check out Dan Higson’s Chapter 7 bankruptcy page or contact the Law Firm of Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez today!
Hathaway Perrett Webster Powers Chrisman & Gutierrez, APC is a debt relief agency pursuant to 11 U.S.C. 528(a)(4) and assists individuals, families, and businesses file for bankruptcy relief under the Bankruptcy Code. This website is a communication under California Rule of Professional Conduct 1-400. No legal relationship is created by the use of this website and no legal advice is provided. No guarantee or warranty is provided that your case or matter will achieve any particular result and testimonials and endorsements provided on this site do not constitute a guarantee, warranty, or prediction about your matter or case. This communication is made on behalf of Hathaway Perrett Webster Powers Chrisman & Gutierrez, APC and DANIEL A. HIGSON, State Bar No. 71212 is responsible for its contents. All information contained on this website may be factually substantiated by a credible source, including data from the United States Public Access to Court Electronic Records (PACER) system. Detailed data and information is available on request.