With so many benefits, it’s easy to assume that Chapter 7 bankruptcy is the best way to improve your finances. And in many cases, you may be right.
However, before you file, you’ll want to learn more about some potential disadvantages. This knowledge allows you to plan accordingly. Here are some things to keep an eye out for:
- Impact on your credit: A Chapter 7 bankruptcy will remain on your credit report for 10 years, which makes it difficult to secure a loan in the future.
- You may lose some property: Any property that is not exempt from sale by the trustee could be lost forever. This is particularly true of assets the court considers to be luxury possessions.
- You’ll lose your credit cards: This looks like a bad thing on the surface, but it’s actually beneficial because you don’t have to worry about abusing them again in the future.
- Doesn’t eliminate all your debt: For example, Chapter 7 bankruptcy doesn’t discharge student loans, alimony, child custody and liabilities resulting from criminal charges.
- Eliminates the potential to file again in the near future: Once you file for Chapter 7 bankruptcy, you can’t do so again for six years. So, if you once again face serious financial trouble, you’ll have to find another solution.
If you’re strongly considering Chapter 7 bankruptcy, compare the pros and cons to decide if it’s the right decision for you at the present time. Once you have the necessary information, it won’t be long before you’re making a final decision and taking steps to improve your finances and protect your legal rights.