Bankruptcy is one of the most common debt relief options available in the U.S. U.S. courts recognize six chapters of bankruptcy, although Chapter 7 and Chapter 13 are the two most common. Chapter 7 Bankruptcy is known as complete liquidation; Chapter 13 is considered a way to reorganize your debt. Although bankruptcy has gotten a bad rap over the years when other debt solutions have failed and your medical business is in jeopardy, it could be the way to get a fresh start on your financial situation.
Pros and Cons of Chapter 7 Bankruptcy Protection
If you are considering Chapter 7 bankruptcy protection, first learn how it can benefit your financial situation, but never decide that it is right for you until evaluating its disadvantages. Whilst Chapter 7 has an array of benefits, some disadvantages are there and you should consider them before filing. We have made doing both simple. Continue reading to learn more about the pros and cons of filing for Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Benefits
Experts say healthcare company bankruptcy filings were up 84% in 2022 compared to filings in 2021. Hearing someone say “benefits” coupled with the word “bankruptcy” seems like a stark contrast. Filing for bankruptcy is the last step anyone wants to take. Yet, Chapter 7 bankruptcy protection includes many benefits and should be considered as a way to recover rather than as a means of punishment.
Individuals, small business owners, and corporations may file for Chapter 7 bankruptcy protection, regardless of the accumulated debt amount. Many people file Chapter 7 after accumulating thousands upon thousands of dollars while others opt to file before their debt reaches such substantial numbers.
Most unsecured debts can be relieved under a Chapter 7 bankruptcy filing, including medical bills, credit card debt, and personal loans. Discharging debts instantly lifts worry and burden off your shoulders. Some debts cannot be discharged under Chapter 7 bankruptcy protection, including child support payments, spousal payments or alimony, and student loans.
Filers do not lose assets such as their home or vehicle if they maintain the monthly payments agreed upon with the courts.
The required credit counseling bankruptcy filers must complete within 180 days of filing is beneficial since it provides information and tips designed to help avoid future financial crises such as this one.
Filing bankruptcy requires that you complete credit counseling within 180 days of completing the paperwork. Filers must pay the fees associated with credit counseling.
Creditors hound debtors like vicious dogs ready to draw blood. Early morning and late at night, creditors demand money via calls to the house and cell phone. Some even resort to calling workplaces. On top of the annoying phone calls are the letters that arrive in the mail. If your situation was not stressful enough, getting hounded by creditors does the trick.
Chapter 7 bankruptcy protection ceases these annoying letters and calls, giving you back some sanity and peace of mind. Not only must creditors cease letters and phone calls, but also any lawsuits or garnishments filed against you. This buys you time to rectify your situation and get the ball rolling on Chapter 7 without the headaches creditors cause.
Additionally, the costs to file for bankruptcy protection in a Florida court may not be as expensive as you imagine. The law firm you select to assist in the filing process accounts for most of the costs of filing for Chapter 7 bankruptcy. Pick a reputable firm like Reep Law to get expertise and cost-effectiveness together in one package.
Chapter 7 Bankruptcy Disadvantages
Choosing Chapter 7 bankruptcy as your debt relief solution has numerous benefits as outlined above in the pros section. However, some disadvantages are associated with bankruptcy important to know before deciding if Chapter 7 is best for your financial situation.
You should know that some disadvantages of filing for Chapter 7 bankruptcy protection do exist. Once you file for bankruptcy, it remains on your credit report for 10 years. Any company that accesses your credit report will see this information, which increases the difficulty in getting approved for loans, credit cards, or major purchases.
The effects bankruptcy poses on your credit are temporary. Often companies offer lines of credit to bankruptcy filers well before the end of the 10 years.
Another disadvantage of Chapter 7 is that not all debts can be discharged. Chapter 7 bankruptcy may not suit people who have accumulated debts such as those from student loans, child support, spousal support, and secured debts.
We mentioned how Chapter 7 bankruptcy filings allow you to keep your car, home, and certain other items, although filers are required to give up some of their property to help satisfy the debt. These items can be jewelry, electronics, property, and other items of value.
Items eligible to keep after filing for Chapter 7 bankruptcy vary. Florida filers face little risk of losing their homes thanks to the state’s homestead exemptions. Check your local laws to verify what qualifies as exempt.
Reasons to File Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a last-resort debt solution used when other options fail. When enough is enough, Chapter 7 can provide a clear outlook for a better financial tomorrow. It is most commonly used by individuals after separation or divorce, after the loss of employment, or after a serious illness or injury. Medical debt is the most common reason an individual filed for Chapter 7 bankruptcy protection. There is no wrong reason to file Chapter 7 bankruptcy if you are looking for a way out of debt.
Chapter 7 Provides Financial Recourse
In a nutshell, Chapter 7 bankruptcy protection can:
- Give you peace of mind
- Stop creditor calls and letters
- Restore your good credit standing
- Help you trek down a path to financial freedom
- Ensure you keep your home and car
- Wipe your slate clean of debts
If you have acclimated medical debt or other types of debt, Chapter 7 bankruptcy can help. If filing bankruptcy protection, has crossed your mind, the decision has life-altering impacts on your financial future. Consider the pros and cons of filing bankruptcy as outlined above to help better decide if this is the debt relief solution you need to get back on the financial track.