It can feel like there’s no escape from economic difficulties, especially when you’re in the midst of them. You may know that bankruptcy can offer relief from severe financial struggles, but determining the correct type of bankruptcy to file is difficult.
Chapter 7 bankruptcy, also known as straight bankruptcy or liquidation bankruptcy, is a common option that offers debt relief and strives to provide you with a fresh start. To regain control of your life and clear your debt, Chapter 7 bankruptcy requires you to sell all “nonexempt assets.” This includes valuable jewelry, designer clothing, newer vehicles, valuable collections and any additional homes you may have. Mariano & Coiro, P.C., can help you decide if Chapter 7 is right for your situation.
What are the pros to Chapter 7 bankruptcy?
Getting fast relief from crippling debt and the thought of starting a new chapter of your life without financial anxiety weighing you down both have appeal. The opportunity to begin anew in an average of three to six months is one of the main pros to Chapter 7 bankruptcy, but there are many other pros, including the following:
- A chance to start over: Although Chapter 7 bankruptcy requires the court to sell your luxury possessions, New Jersey exemptions tend to be generous, and filing gives you the freedom to regain control of your life again. For example, your wages and any property you purchase after declaring Chapter 7 bankruptcy will remain yours and not be used to pay back your debts.
- Relief from creditors and debt collectors: After filing for Chapter 7 bankruptcy, harassment by creditors in the form of emails, phone calls and letters will stop. This is called an automatic stay and, in most cases, will last for the duration of the bankruptcy. The stay then will effectively become permanent once debts are discharged.
- Peace of mind: One of the greatest advantages to filing for bankruptcy is its ability to ease your stresses and anxieties in life. Knowing you can start over is one of the greater gifts bankruptcy can give.
A huge upside to filing for Chapter 7 bankruptcy is the immense alleviation of stress it can bring to your life. Debt can hold you back in life, but bankruptcy can help set you free. However, Chapter 7 bankruptcy still comes with some costs.
What are the cons of Chapter 7 bankruptcy?
While there are pros to filing for Chapter 7 bankruptcy, there are also negative consequences to doing so. Some of these cons are as follows:
- Loss of property: As Chapter 7 is a liquidation bankruptcy, the court can settle your debt by selling property you own that is deemed as “nonexempt.” This typically includes property you own that could be deemed as extraneous or with a market value greatly exceeding the exemption amount.
- Negatively impacts credit score: It can be hard to see your credit score ruined as a result of economic challenges. A Chapter 7 bankruptcy can stay on your credit report for up to 10 years. Additionally, you could find yourself unable to receive a line of credit for around one to three years after filing for Chapter 7 bankruptcy.
- Doesn’t relieve you of all debts: Although Chapter 7 bankruptcy discharges you of some of your debts, it does not discharge all debts. For example, you could still have to pay a mortgage lien, student loans, alimony or child support.
When choosing what type of bankruptcy to file, it’s essential to consider both the pros and cons. Bankruptcy can greatly improve your way of life, but it still has its risks.
Is Chapter 7 bankruptcy right for you?
Weighing the pros and cons of Chapter 7 bankruptcy can be difficult on your own, but an experienced bankruptcy attorney can guide you to making the right decision to preserve your future. At Mariano & Coiro, P.C., we provide consultations for all your bankruptcy needs.