The Pros and Cons of Filing for Bankruptcy Chapter 7

Introduction

Filing for bankruptcy can be a scary decision. What will happen if I do this? Will all my stuff be sold off for dirt cheap? How do I get any money back? Are there any long-term consequences of filing? The list goes on and on, but today we're going to take a look at the pros and cons of filing for bankruptcy, both from a debtor's perspective and from that of companies who may have claims against you upon filing.

Filing for bankruptcy can be a scary decision, but if you're thinking of filing because you can't afford to pay off your debts, or believe that it might be the right choice for you in light of recent economic conditions, here is a look at the pros and cons that may help you decide whether to file for bankruptcy.

PROS & CONS:

• Pro: Cancel Dischargeable Debts Quickly
• Pro: Keep Your Business
• Pro: Keep Your Assets and Property
• Con: Lose Your Co-Signers
• Con: Pay More For Insurance
• Con: Pay More For Credit
• Con: Ruin Your Credit Score

Pros:

Cancel Dischargeable Debts Quickly

The first advantage of filing for bankruptcy is that you can cancel dischargeable debts quickly. Some debts, such as student loans, are dischargeable in bankruptcy. However, most other debts are not dischargeable unless the debtor has met certain requirements for five years after filing for bankruptcy. If you want to stop paying your creditors, you may have to wait at least five years before you can file for bankruptcy protection again.

Chapter 7 bankruptcy offers an easy way out of debt by allowing a court-appointed trustee to liquidate all of your assets — including your house and car — to pay creditors according to their priorities. This means that if there are any valuable assets left over after paying off creditors, they go toward paying off your unsecured debts first.

These unsecured debts include credit card bills, medical expenses, tax liens, and other financial obligations such as child support or alimony payments that have accumulated during the five years following filing for Chapter 7 protection.

Keep Your Business

If you're thinking about filing for bankruptcy, there are several reasons that you should keep your business in mind.

First off, by keeping your business open, you'll be able to continue making money and paying off debts. You may also be able to pay off your creditors before the bankruptcy proceedings begin.

Second, if your business is successful, you'll be able to use the proceeds from liquidation sales or a sale of assets to pay down debt and expenses so that you can qualify for Chapter 7.

Finally, some states allow businesses with multiple locations to file under Chapter 7 even if a single locatiplacet in operation at the time of filing.

Keep Your Assets and Property

The best way to keep your assets and property is to file for Chapter 7 bankruptcy. If you file for Chapter 13 bankruptcy, you will have to pay back your creditors over time. You may also have to make additional payments on your debts after filing for Chapter 13 bankruptcy.

Chapter 7 bankruptcy gives you a fresh start. You can keep all of your property and assets and not have to pay back any creditors. This means that you can start fresh in life without having to worry about repaying debts or making payments.

Chapter 7 Bankruptcy Is Usually Available To Almost Everyone

When you are in financial trouble, there is always a chance that you will not qualify for Chapter 7 bankruptcy protection. The only requirement is that your income is lower than $100,000 per year at the time of filing. If the exemption amount is too low, then it may not be possible for you to file for Chapter 7 Bankruptcy protection without making significant sacrifices or cutting back on expenses like food and transportation costs.

Cons:

Lose Your Co-Signers

A Chapter 7 bankruptcy can help you get out of debt and begin rebuilding your credit. But it's not for everyone. It's important to understand the potential downsides before you file for bankruptcy.

Lose Your Co-Signers

Some people who file for bankruptcy do so because they can't afford their monthly payments anymore. Others choose to file because they are struggling with their finances and want to give themselves more time to find a solution. However, if you're in default on your mortgage or car loan, having legal protection is important. You may lose your ability to get credit if you don't have a cosigner.

If you file for bankruptcy and lose your co-signers, you will have to pay them back the money they loaned you. You may also be required to pay the bank that holds your car title a fee for repossession.

You may also lose your home if you do not keep up with payments on a mortgage or other loan. If one of these loans is worth less than the amount owed, it could be sold to cover some of your debt.

You may also lose access to retirement benefits, including Social Security and/or pension benefits.

Pay More For Insurance

The biggest reason people don't file for bankruptcy is that they are afraid they will have to pay more for insurance after they file.

The truth is that you won't have much trouble finding affordable health insurance if you are unable to keep your job. If you have a preexisting condition, it may be difficult to get coverage, but there are ways around this if necessary.

In many cases, if you have enough savings and don't mind paying the high premium costs of a major medical plan, you can find affordable health insurance through an online broker or through a local agent. In other cases, employers offer their own plans or will help their employees find an individual policy on a group plan.

Pay More For Credit

One of the most common cons of filing for Chapter 7 bankruptcy is that you will have to pay more for credit. The reason for this is that when you file, it is a public record, and creditors can see your bankruptcy petition. This can make it difficult to get loans or even open a bank account after you've filed for bankruptcy.

You may also be denied credit if your bankruptcy petition shows that you have too much debt. If you were once approved for a loan or other financial services and then suddenly declared bankruptcy, creditors may refuse to offer new services to borrowers who are in arrears with their payments.

If you file for bankruptcy under Chapter 7, you will have to pay more in interest and fees to your creditors. You will also lose all of the protections that come with filing under Chapter 7, such as the ability to stop foreclosure and repossessions.

You will be required to pay back any amount owed to your creditors within five years of filing for bankruptcy. In addition, if you do not make payments on any debts during this period and files for bankruptcy again, your debts will increase by 25 percent of the amount owed at the time of filing.

Ruin Your Credit Score

Ruin Your Credit Score: When you file for bankruptcy, your credit score takes a hit. This can be detrimental to your ability to get approved for loans and other financial services in the future.

Increased Taxes: Filing for bankruptcy can increase your taxes in several different ways. You could owe taxes on any money that was used during the period of your case, or even worse – property taxes on property that was sold at a sheriff’s sale or auction since it was not yours when you filed your case.

Impact on Student Loans: If you have student loans and are considering filing for bankruptcy, make sure that these loans aren’t eligible for discharge under any circumstances because they will remain with you even after the case has been closed by the court system.

Eligibility for Chapter 7 Bankruptcy

Eligibility for Chapter 7 Bankruptcy

To qualify for a Chapter 7 bankruptcy, you must meet the following requirements:

Your debts must be less than your assets. If you have any unsecured debts (such as credit cards or medical bills), your total debts cannot exceed the fair market value (FMV) of your nonexempt property, minus any exemptions. Fair market value is determined by an independent court-appointed bankruptcy trustee who will liquidate your assets to pay off your creditors.

You cannot have too much debt. The more debt you have, the harder it will be for your creditors to get paid back in full after filing for bankruptcy.

You must not receive payments from any other sources besides Social Security or other government benefits and wages. If you receive money from a relative or friend, that money is considered income and may prevent you from qualifying for bankruptcy relief if you don't have enough income to make ends meet after paying all of your monthly expenses, including health insurance premiums and other household costs.

How Chapter 7 Works

Filing for bankruptcy is a process that allows you to reorganize your debts and pay off what you can. You do not need to go through this process if you can afford to pay all of your debts. However, if you cannot afford to pay all of your debts, then filing for Chapter 7 bankruptcy may be a better option for you than not filing at all.

Chapter 7 Bankruptcy Is Not A Get-Out-Of-Jail-Free Card

One of the main reasons people file for bankruptcy is because they don't have enough money to pay their creditors. However, this is not true in every case. If there are other reasons why you should file for Chapter 7 bankruptcy, such as an illness or accident that prevents you from working, these may also be reasons why you should file for Chapter 7 bankruptcy instead of not filing at all.

There are many different types of bankruptcy available today and each one has its own benefits and drawbacks. The most common type of bankruptcy is Chapter 13 which allows debtors to repay their debts over three to five years with monthly payments to their creditors.

The Cost to File for Chapter 7 Bankruptcy

Chapter 7 bankruptcy allows debtors to discharge most of their unsecured debts and keep certain property. The total amount of liquidation can be deducted from any future income. If you are not required to pay child support or alimony, then the court will order a few payments on the debt each month for up to three years.

The total cost of filing for bankruptcy depends on your income, assets, and the type of case you file. The average cost is $1,400 per person in fees and expenses. However, some states have lower fee structures that allow you to file for Chapter 7 without paying all these costs upfront; instead, you can make monthly payments until the entire balance is paid off.

• Chapter 7 bankruptcy provides debtors with an opportunity to stop making payments on their debts, allowing them to focus on paying off their unsecured debts. This makes it possible for debtors to keep their homes and vehicles while they work with their creditors to settle the remaining debts through negotiations or litigation.

Documents You Need to File for Chapter 7

The documents you need to file for Chapter 7 bankruptcy include:

• A list of all your creditors and their addresses, phone numbers, and account numbers.
• Bank and credit card statements, including any recent payments you've made from those accounts.
• Proof of income, such as pay stubs or tax return information, if you're earning money elsewhere. If you're unemployed or underemployed, this may include documentation showing how much money you made in the past six months.
• A list of all your assets (property, investments, and cash) that are worth more than $100,000. You'll need this if you want to keep some of your property after filing for bankruptcy relief.

Application for relief. You must file this form with the court clerk in your county.

Declaration of intent. This is a statement that you wish to file for bankruptcy and that you understand what it means, who it affects, and why you need it. It's also a sworn statement telling the court what happened to cause your financial problems, when they began and how much money you owe creditors.

Proof of debts (if applicable). You will have to provide proof of debt (bank statements or other records) if anyone suggests that you may not be able to pay your debts in full.

Proof of income (if applicable). If you don't have any income, then this form will probably be required as proof of your ability to pay debts in full.