Deciding to Declare Chapter 7 Bankruptcy

Chapter 7 bankruptcy is one of the biggest decisions you can make for your financial future. There are negative consequences to filing for bankruptcy. At the same time, there are some positives that can come out of doing so. Each individual needs to make his or her own decisions regarding filing for bankruptcy. In many cases, you have to look at the long term benefits and negatives, not just the immediate benefit.

To File or Not to File

When you declare bankruptcy, through Chapter 7 bankruptcy, the individual be requesting that the court seize any extra assets you have that are not protected under bankruptcy exemptions and to discharge all debt you have. With that in mind, consider the following before you decide to file.

• If you have excessive assets, over and beyond what is allowable under your state’s exemptions, filing Chapter 7 bankruptcy is not the route to take. You may lose those assets.
• If you have a significant amount of debt that you will be unable to pay off within three to five years, it may be best to file bankruptcy and to start rebuilding your credit. In general, you will be able to obtain new credit and secured loans within that period of time if you file.
• For those that own a small business that is a sole proprietorship or a partnership, consider your state’s laws on how your business will be treated. In some cases, your business assets may be considered personal assets. You may lose those assets if they are not protected under exemptions.
• The stigma of filing bankruptcy is no longer present, but the credit implications will remain on your record for ten years. During this time, loans and lines of credit you receive will have a higher interest rate and you may face more frequent rejections.
• In some situations, individuals who have income and can make payment even over a longer period of time are better off avoiding bankruptcy. If you can afford to repay your loans over time, do so. It will result in a better credit score for you over the long term.

It can be hard to make this decision on your own. It is always a good idea to consider other solutions before bankruptcy, too, such as debt settlement, credit counseling and bad credit loans.

Hiring an Attorney

To get a better idea of what your options are, speak with an attorney. The attorney can help you to learn if you qualify, if your assets will be protected and what the outcome will be.