Filing for bankruptcy is an extremely important financial decision. Taking this action can eliminate crushing consumer debt and give you a fresh financial start. But it also comes with certain drawbacks, all of which you should understand when making this very personal decision. You need to know before you go when it comes to a bankruptcy filing to determine if it is the right action for you based on your unique financial situation and your overall goals and objectives.
Want to discuss your legal options regarding a bankruptcy filing in Chattanooga? Reach out to Conner & Roberts, PLLC to book a complimentary consultation at (423) 299-4489 today.
Advantages of Filing for a Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is the most common filing that occurs across the country so that is the form we will discuss in this blog regarding advantages and disadvantages as shown below.
- As soon as you file for a Chapter 7, an “automatic stay” is issued by the bankruptcy court that prohibits your creditors from contacting you in any way. From then on, they can only go through the bankruptcy court.
- A successfully completed Chapter 7 eliminates consumer debt, such as credit card debt, medical and dental bills, payday loans, past-due utility bills, and similar debts that have no collateral. This elimination is done through a discharge of these debts by the court.
- Your chances of successfully completing your bankruptcy case is very high. As long as you follow the legal rules and stay honest in your dealings with the court, your case can generally be completed within months.
- You will generally be able to hang on to your property and belongings. This is because certain property, called “exempt,” is generally protected under state or federal bankruptcy law. In cases where this is not an option, you can still opt to file for a Chapter 13 that allows you to retain property through a repayment plan.
- Your credit report will no longer be hit by continued missed or late payments. Once your case is completed, you can create a financial plan to rebuild your credit.
Disadvantages of Filing for a Chapter 7 Bankruptcy
- Certain unsecured debts are not eligible for discharge so cannot be eliminated. These include such debts as unpaid child support or alimony, student loan debt, tax debt, and settlement amounts you may owe on a personal injury lawsuit.
- Your credit score will take a big hit. A bankruptcy filing will generally remain on your credit score for seven years. This can make certain financial opportunities unavailable or difficult to obtain. However, you can begin rebuilding your credit as soon as your case is completed in various ways, such as through prepaid credit cards and staying current on all loans or credit.
- You may have to give up certain types of property, known as “non-exempt,” meaning that they are not protected by law and can be liquidated to pay off creditors. To protect such property, you can opt for a Chapter 13; this is best decided with the help of an attorney.
- Filing for bankruptcy is not free – you have to pay for it. This has to be accounted for and can put you further into debt. Bankruptcy generally includes filing fees, legal fees, and credit counseling fees that must be paid prior to filing.
Talk to an Experienced Attorney About Your Options
As you can see, there is a lot to consider when contemplating bankruptcy. That is why we highly recommend that you work with an experienced lawyer who can educate you on the process, on what to expect, how to prepare, and provide further guidance on the pros and cons of the matter. Once you understand all of these considerations, you can make an informed and intelligent decision.
At Conner & Roberts, PLLC, our legal team serves individuals and families throughout the Chattanooga area with knowledgeable and skilled legal representation. We know that we win when you win and that is why we gear our practice on protecting your best interests through appropriate and proper legal action, whether it is bankruptcy or other debt-relief options. If you are wondering how to handle your debt overload, we urge you to discuss your situation with one of our compassionate and diligent attorneys as soon as possible.
Call us at (423) 299-4489 to get started today.