Whether we face the reality of a financial crisis or not, sometimes there's no easy way out. Events can conspire to overwhelm you, and in the end, the only option you may have left is to file bankruptcy. Most bankruptcies in the United States are either Chapter 7 or Chapter 13 and deciding which one is right for you depends on your income, assets, debts and other financial issues.
Chapter 7 bankruptcy is a liquidation bankruptcy that wipes out all general unsecured debts such as medical bills and credit cards. To qualify, you must have little or no disposable income, meaning it would be difficult to pay your unsecured debts in your current situation. A trustee will be appointed under a Chapter 7 filing and will sell your nonexempt property to pay back your creditors. If you don't have nonexempt assets, your creditors will get nothing from you.
The pros of filing a Chapter 7 bankruptcy
- The process from filing to actual debt relief is short, taking only 3-6 months in most cases.
- Most state exemptions are generous enough so that most of the things you own will be exempt from bankruptcy.
- You get to keep the salary or wages you earn and the property you buy after you file for Chapter 7.
- You can generally get new lines of credit in as little as one to three years after filing, although it will be at a much higher interest rate.
- Filing Chapter 7 prevents lenders from aggressive collection actions.
The cons of filing a Chapter 7 bankruptcy
- A Chapter 7 bankruptcy can remain on your credit report for up to 10 years.
- You will lose property that is not exempt from a Chapter 7 filing. This may include some of your luxury possessions.
- You will lose all of your credit cards.
- You will not be relieved of your alimony or child support obligations.
- Filing a Chapter 7 bankruptcy will not get rid of your student loan debt.
- You can't file for Chapter 7 if you have gone through a Chapter 7 or Chapter 13 bankruptcy within the last six years.
The Hixson Law Firm serves clients in Mansfield, Arlington, Grand Prairie and other nearby Texas communities.