When you need to file for Chapter 7 bankruptcy, it's likely that you think you have no other options. Perhaps your debts are overwhelming or you want to save your home from foreclosure. There are many other options other than bankruptcy, but if those options have been exhausted, it may be time to consider it. Whatever the reason, it's possible to liquidate some of your assets to get a better financial start.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is the easiest and quickest type. It's good for unsecured debts. It can help you eliminate credit card debt, medical debts and personal loans. You might have to liquidate assets like second vehicles or second homes, but many people don't have to give up much if anything at all.
Won't your credit be affected if you file for bankruptcy?
When you file for bankruptcy, you will suffer a loss on your credit. Your score becomes reduced, which hurts your ability to get new loans or mortgages for the next seven to 10 years. However, if you've already been missing payments or struggling to make ends meet, it's likely that your credit has already been affected negatively.
Bankruptcy may be right for you if your debts are more than half your annual income. If it would take over five years to pay it off, then this is also a sign that bankruptcy is a good choice for you.
If your debts interfere with other parts of your life, then that's a good sign that bankruptcy could help you in the future. Your attorney can help you decide if it's the right step to take for your financial future.
Source: NerdWallet, "Bankruptcy Basics: How to File for Chapter 7 or Chapter 13," Sean Pyles, accessed Feb. 19, 2017