Those who qualify for Chapter 7 bankruptcy will receive enormous financial benefits. The reduction of stress alone is well worth the effort in many cases. However, it's important for those who file for bankruptcy to also stay realistic about the process because there are some very relevant downsides to being a bankruptcy filer.
When debtors fully understand the potential downsides of Chapter 7 bankruptcy -- and can realistically weigh them against the benefits -- they can move forward with the processes in a grounded and practical fashion.
The potential setbacks of Chapter 7 proceedings
Here are some of the most common downsides of Chapter 7 bankruptcy that filers need to be aware of:
- It will be a long time before you escape the negative marks on your credit history. A Chapter 7 bankruptcy could follow you for as long as a decade.
- It's likely that you'll have to give up many, if not all, of your luxury possessions. Although much of your property will be exempt from litigation, it could be hard to let go of certain items as a part of the bankruptcy liquidation process.
- If you don't already have a mortgage, filing for bankruptcy will make it next to impossible to get one.
- You will probably need to close all your credit cards, and it will be difficult to get new ones for some time.
- If a worse debt situation comes to haunt you after completing your bankruptcy, you'll have a difficult time filing for bankruptcy again for the next six years.
- Student loan debt, back child support and most tax debts will continue to follow you after the completion of your bankruptcy process.
- Chapter 7 bankruptcy is difficult to qualify for. A court could convert your Chapter 7 filing to a Chapter 13 filing if you have a certain amount of disposable income.
Are you ready to file for Chapter 7 bankruptcy?
After a thorough review of the above drawbacks of Chapter 7 bankruptcy, if you still want to move forward with the process, it's time to focus on the legal strategies you will implement during your bankruptcy. These strategies will center around ensuring you meet all of the qualifications for Chapter 7 and trying to get as many of your personal assets as possible to be exempt from liquidation.