Filing for Chapter 7 bankruptcy protection has long-term consequence, and should not be decided in haste. Being in debt is never a desirable situation, but other forms of debt reduction should usually be attempted before turning to bankruptcy. Overwhelming debt is no laughing matter, and something substantial must be done to create a sustainable financial future. In order to make an informed decision about whether bankruptcy is the right choice, a discussion of some of the pros and cons of this process, both in the short- and long-term for a petitioner, will follow below.

Advantages

Of course, the main advantage, and the reason people pursue bankruptcy, is that most, if not all, debt is discharged, and the petitioner is no longer responsible for paying it. The process from beginning to end typically takes three to six months to complete, and while the bankruptcy case is pending, creditors are not permitted to contact the petitioner in any way. Importantly, and perhaps a frequently assumed mistake, there is no minimum amount of debt that must be outstanding to file for bankruptcy, though filing for bankruptcy is not free, so the debt owed should be enough to outweigh this expense.

As long as the debt owed does not survive bankruptcy, there is no limit on the amount of debt a court can discharge. Federal and State bankruptcy laws will allow petitioners to keep most of their property, and all earnings and property acquired after filing for Chapter 7 bankruptcy protection are exempt from the bankruptcy process, as well. However, cars and houses, the most important assets for many people, may not make it through bankruptcy depending on whether the property has a lot of equity compared to the amount owed. However, if the amount owed is much greater than the value, or the payment is too high, turning the property over to the lender may still be the best choice long-term.

Disadvantages

The most concerning issue for many people contemplating bankruptcy is the damage to their credit rating. A bankruptcy does stay on a person’s credit history for up to 10 years, and limits the type and amount of credit he/she can access. Most filers can get credit within one to three years of discharge if they are willing to pay higher interest rates. It is true that petitioners could lose possession of some property, especially luxury items. Most petitioners are able to keep everything, though they may have to reaffirm debt for houses/cars, which is not included in the bankruptcy discharge, to avoid losing the property. On a related note, some debt is not dischargeable, and will still exist after the bankruptcy case is over.

Thus, assessing the types of debt one has is a critical factor in whether this process will work. For example, student loans, a huge burden for millions of Americans, are not discharged in bankruptcy, nor are alimony, child support, or unpaid taxes. Finally, anyone who files for bankruptcy has the potential to be audited by the bankruptcy court to examine if they are misrepresenting or falsifying information for fraudulent purposes. While the number of people selected for an audit is small, there are indicators that bankruptcy trustees look for when choosing which cases to flag, and an experienced bankruptcy attorney will know how to avoid triggering this type of unwanted attention.

Consult a Bankruptcy Attorney

Filing for Chapter 7 bankruptcy protection seems like an attractive option for anyone drowning in debt, and while it can offer substantial relief, an experienced bankruptcy attorney is in the best position to know if this is a viable option for a particular person. Attorney Christopher L. Arrington understands how hard debt is to discuss, and is available to advise on all the legal options that could affect your specific circumstances. If you live in Danville, Brownsburg, Avon or the surrounding area, contact him to schedule an appointment, and start the process of moving beyond your debt now.