As you learn more about Chapter 7 bankruptcy, it's natural to focus your attention on the benefits. For instance, you're able to reduce or eliminate many forms of debt, giving you a fresh start.
While there's no denying the benefits of Chapter 7 bankruptcy, you shouldn't proceed until you're familiar with the primary drawbacks. Here's what you need to know:
- It impacts your credit score and report: A Chapter 7 bankruptcy filing remains on your credit report for 10 years, making it difficult to secure a loan for a home or car.
- You could lose property: Any property that is not exempt is at risk of being sold by the bankruptcy trustee. There's a good chance you'll lose some of your luxury possessions.
- It doesn't relieve you of all your debts and obligations: For example, Chapter 7 bankruptcy rarely has an impact on student loan debt. Also, it doesn't do anything for you in regard to spousal support and child support payments.
- You'll lose your credit cards: This isn't necessarily a bad thing, as it can help you avoid the same trouble but losing your credit cards will definitely alter your financial approach.
As you learn more about the pros and cons of Chapter 7 bankruptcy, you can make an informed decision on what to do next. If you come to realize that the benefits outweigh the potential drawbacks, learn more about the eligibility requirements and how to file.
Once you understand the process, your legal rights and how to position yourself for future success, you can take action.