3 Drawbacks Of Chapter 7 Bankruptcy
Choosing to get a fresh start by filing Chapter 7 bankruptcy is often a great solution for major financial problems, but there are several drawbacks you should be aware of before you file. By knowing these, you can weigh out the pros and cons of Chapter 7 to decide if it is right for you. Here are three of the main drawbacks you may experience if you decide to file.
You will lose your credit cards
Losing your credit cards is something you should automatically expect when you file for Chapter 7, and this includes every credit card you own. It does not matter if you owe a balance on the card or not; your credit lines will be closed. While this is a drawback of Chapter 7, it really can be viewed as a positive effect. If you lose your credit cards, you will not be able to get back into debt after you file. Over time, you can rebuild your credit and qualify for credit cards, but hopefully you can learn to live without the use of credit.
You may lose property
When filing for Chapter 7, there is always a chance you may lose assets you own. This can include money you have in the bank, cars, or other types of valuable assets. The purpose of this is so the trustee can raise money by selling your assets as a way of repaying some of the debt that is discharged through the bankruptcy.
This can seem like a negative aspect of bankruptcy; however, if you are in really bad financial shape, there is a good chance you may not have any assets that are worth enough for the trustee to take. If this is the case, you may not have to worry about this occurring if you file.
Your credit will suffer
After filing for bankruptcy, your credit may drop significantly. This occurs because a public record is added to your credit report, and this public record will remain there for 10 years. You can start rebuilding your credit after you file, though, and within a few years you might have a credit score that is good enough to qualify for loans.
The good news in this is that your credit score might already be bad. In this situation, filing for bankruptcy might not cause the score to drop a whole lot, but it would give you the ability to be debt free instantly.
If you would like to learn more about the effects of bankruptcy, contact a lawyer, such as Donald T Tesch, PS, for more information.