If your money woes keep snowballing, leading you into deeper debt, filing for Chapter 7 bankruptcy may be the ideal solution. This legal process can provide relief by clearing either some or all of what you owe, allowing you to get your head above water again.
Some obligations are excluded, but for the most part, you can discharge a variety of debts. This gives you the chance to get a fresh start, but it isn’t simple. Plus, the repercussions of filing for Chapter 7 bankruptcy may mean you lose some of your physical assets while your credit score takes a major tumble.
Knowing more about Chapter 7 bankruptcy and when you should file can help you determine if this is the right solution for your situation.
When You Should Consider Filing for Chapter 7 Bankruptcy
First, you should try negotiating with your creditors, consolidating your debt, or working with a credit counselor. However, if you’ve tried these avenues to get out of debt and are still struggling, Chapter 7 bankruptcy may be the ideal option.
Once your petition is filed, many of your creditors will be barred from collection actions and you’ll stop receiving those annoying phone calls. Unfortunately, you’re likely going to lose some assets. It will depend on whether or not your property is classified as exempt, meaning it can’t be taken.
If you’re concerned about which assets you may lose, speak with a Long Island Chapter 7 bankruptcy attorney who can guide you through the process.
Know the Downside of Filing for Chapter 7 Bankruptcy
While there are some advantages to filing for Chapter 7 bankruptcy, including freeing yourself from the oppressions of debt and getting a fresh start, it’s not all sunshine and rainbows. You may wind up with liens placed against your property, even losing it altogether.
While you do essentially get to hit the reset button, your credit score is going to take a massive dive. Bankruptcies will be listed on your credit report and can reflect poorly when you get into a better position and try to apply for a home or car loan.
The amount of points you can lose by filing for Chapter 7 bankruptcy will depend on your current credit score at the time of filing. Other factors that relate to your financial situation will also affect it. Chapter 7 bankruptcy will be present on your credit reports for up to 10 years. While it won’t always prevent you from qualifying for new credit, you may face higher interest rates and fees since creditors will deem you as a greater risk.
On the bright side, credit can be improved with time, especially if you take the right steps to move forward after filing for Chapter 7 bankruptcy. With a legal action this serious, it’s a smart idea to speak with a bankruptcy attorney about your situation and determine if this is the right course of action to get your life back on track.