Is Chapter 7 Bankruptcy Right for You?

Chapter 7 bankruptcy is also known as total liquidation. It is the type of process that allows an individual to state he or she cannot pay debts and would like the court to forgive those debts. Through this legal process, individuals are given a discharge of their debt, which means they do not have to repay that debt at any time in the future. However, there are consequences to this action. While it can be very important for someone people who are seeking a better financial life, it can have a lasting impact on a person's future. Loss of Assets One of the ways in which Chapter 7 bankruptcy can have a lasting effect on your future is due to the potential loss of assets. During this process, the court will take ownership of a person's estate and, during the final stages, will sell any property considered excessive. The funds from such a sale are then divided between creditors. In most cases, there are special laws that protect some items, including some personal items, one vehicle and a home's value up to a certain point. Those who own a significant amount of property that's not protected or a home with a large amount of equity may not wish to file to be bankrupt. Doing so could be very expensive. In another form of bankruptcy called Chapter 13, all assets are protected. Lasting Credit Black Mark In addition to this, filing to be bankrupt will also leave a black mark on your credit report. This will remain there for up to ten years. During that time, you may find it more difficult to obtain credit to buy a car or a home. In addition, some employers will not hire those with this on their credit report. You may also find that some insurance companies will raise your rate as a result. Before you take this step, then, consider if you can live on a cash-based budget and ensure that you can be financially responsible for making better decisions in the future. For many people, though Chapter 7 bankruptcy has some ideal benefits. It gives a person a financial start when he or she may otherwise be unable to repay a large amount of debt. In addition, it can help individuals to rebuild their finances quickly. If you cannot repay your debt in total within the next three to five years, it may be wise to consider filing. If you are unsure if it is the right decision for you, speak to an attorney about it. You may quickly learn that there are some key advantages to taking this step.