One of the misunderstandings that we tend to run into with clients seeking bankruptcy help, is that they believe filing for bankruptcy will make all of their problems go away.
They have somehow got the idea that filing for Chapter 7 bankruptcy relief will magically clear all of their debts, and let them get a fresh start in life, with no side effects.
If only that were true!
But bankruptcy doesn’t mean simply wiping the financial slate clean and starting over. There are definite consequences to this choice. And they might not work for you!
Filing Chapter 7 DOES NOT discharge all unsecured debts
This is very important. Filing chapter 7 bankruptcy doesn’t mean you get all of your debts dealt with. For those of you who aren’t aware of the definition, unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or directly tied to an asset.
Examples of this would be student loans, recent taxes owed, certain unpaid bills, and even delinquent court-ordered child support payments, fines, court costs and so on. So for someone whose only debts are unpaid student loans and child support debt, chapter 7 may be the wrong choice.
You might lose property in the process
For people who don’t own many assets, there isn’t much concern over loss of property. But for those who have built up numerous valuable assets over the years, liquidation can be a very difficult process!
You could lose your home, your vehicles, and numerous other luxury items along the way. In addition, you may also lose the ability to have credit cards in your name, and use a credit cards for a fixed time after your bankruptcy settlement. Although some assets are exempt (or set aside) during a Chapter 7 bankruptcy, the remaining assets are liquidated to pay your creditors.
Your credit will likely be ruined for a while
This is one of the unavoidable aspects of filing for relief under Chapter 7 of the U. S. Bankruptcy Code – a plummeting credit score. For people whose credit was already suffering because of unpaid debts, repossessions and wage garnishments, this may not be a big deal. But for those of you whose credit was still decent, this side effect could be a deal breaker!
Having very poor credit can take many years to recover from,and can have lasting consequences for your future. Things like buying a home, applying for a low APR credit card, getting a personal loan or buying a decent car may all be off the books for a very long time.
Consider all of your options first!
Making the decision to file Chapter 7 is a big one. It needs lots of careful consideration, and the advice of a skilled bankruptcy attorney. There may be other ways for you to solve your financial problems. Other debt relief options that you hadn’t considered, or didn’t know about. So don’t rush into this choice – make sure that you’re considering all of the options first.
If you have questions about bankruptcy, or are considering filing Chapter 7, come in and talk to our skilled bankruptcy attorneys. We have been involved in helping clients seek protection under the bankruptcy code for decades. We can explain your options, help you with whatever process is right for your life, and help you prepare for your future. Call The Kronzek Firm today at 866 766 5245. We’re here to help!