The Disadvantages of Chapter 7 Bankruptcy
RGG Law has already covered both the advantages and disadvantages when filing for Chapter 13 bankruptcy. As an ongoing exploration of the pros and cons of filing bankruptcy, we will be doing the same for Chapter 7 bankruptcy.
When most people think of the word “bankruptcy”, Chapter 7 bankruptcy is what they usually think of, even if they are unaware of the specifics. This is the typical “wiping the slate clean” kind of bankruptcy that most imagine. As with Chapter 13, there are plenty of misconceptions, misunderstandings and assumptions that people make about Chapter 7, and RGG Law hopes to dispel some by weighing up the good and bad.
As with our previous look at Chapter 13, these entries are intended for educational purposes and only give a general look. For more specific advice on filing bankruptcy, you can contact us for a free consultation. Also, while we are starting with the negative side of things in this entry, remember that we will be following it up with a look at the positive implications in a coming entry.
Non-Exempt Property is Lost
If you own property or assets that are not considered exempt from repossession, there is a good chance you will lose them in order to settle your debt. While the state of Missouri has a list of exemptions, they are typically based on being under a specific value.
So, if you own a second home valued over $8000, which most homes are, it is likely to be claimed as part of the repayment. To complicate this further, there are some differences between state and federal exemptions. With the help of a bankruptcy lawyer, you will need to navigate a lot of these more complicated, fine-print conditions.
Compounding the risk of losing property or assets when you file for Chapter 7 bankruptcy is the fact that you are unlikely to have much say in what gets taken to repay. While there are exemptions and options available, you have little to no room for negotiation.
Put simply, when you file bankruptcy, the law is that all property must be listed. What is chosen from that list is then out of your hands. Because of this, it is very important that you consider your options and what you are willing to give up, before you file bankruptcy.
Your Co-Signers Will Inherit Your Debt
If your financial predicament involves co-signers, then filing bankruptcy will not protect them. Chapter 7 bankruptcy will only cover you, any co-signers will be left with some or all of the debt unless they also file bankruptcy.
This can make matters complicated, depending on your relationship with your co-signers. They will be left to pick up the tab for whatever has been discharged from you as a result.
Your Credit Report
As with Chapter 13 bankruptcy, Chapter 7 bankruptcy will remain on your credit history for ten years after you successfully file. It is important here to measure how important it is going to be in the future, and whether the damage is worse than having late or unpaid debts. If you are in a situation where you are considering filing bankruptcy, your credit score is likely already negative.
Chapter 7 Bankruptcy and Assessing the Risk
If you are considering filing Chapter 7 Bankruptcy, these are a few of the more complicated aspects you should begin thinking about. There is far more to it than a blog entry can cover, and these are just the cons. In our next entry, we will look at the pros of filing, and how it can help you in the long term. If you need more details or advice, contact RGG Law for a free consultation.