Considering a Chapter 7 bankruptcy is a big decision that will affect many aspects of your financial history and future. Here are some of the major implications to expect with Chapter 7 bankruptcy.
Debt and Credit Effects
The process of completing a Chapter 7 bankruptcy takes a few months from start to finish, and after that time, you'll be eliminated from most types of debt. This can give you the freedom you need to start rebuilding your assets.
The tricky issue is that the bankruptcy will stay on your credit report for up to a decade. Considering that accumulated debts can also affect your credit negatively for many years, it may be a good trade-off; employers and other people who look at your credit report may be more understanding of a bankruptcy than with ongoing debt problems.
Implications for Your Assets
Some of your assets will go towards paying off your debts; a bankruptcy trustee will manage the sale of some of your luxury possessions that are not exempt. The good thing about Chapter 7 bankruptcy is that it allows you to keep some possessions under exemption. Most state policies allow you to exempt your necessities, such as housing and transportation. Depending on your state, you may be able to keep additional property that you own. Chapter 7 bankruptcy also allows you to keep income that you earn after the bankruptcy paperwork is filed.
Effects on Future Credit Applications
Finally, it's important to be aware of the effect on your future credit card, loan and mortgage applications. Many credit cards will allow you to open up a line of credit after a few years of bankruptcy, although you'll likely experience much higher interest rates. Finding a mortgage may be difficult for new purchases.
How to Decide Whether to File Bankruptcy
As you can see, there are many implications of bankruptcy that reach beyond the absolution of your debt. A bankruptcy attorney can help you determine which laws apply to your situation, to help you to weigh your assets and consider how much would be lost in each scenario. They can also help you decide on whether to choose Chapter 7 or Chapter 13 to protect your assets. And, they will be in your corner should any issues arise, such as disputes about who your assets should go to. Bankruptcy can carry many benefits, as long as you are prepared and informed of the implications.
For more information and advice, talk with a bankruptcy attorney, such as D Derk Demaree Attorney at Law.