Pros & Cons of Chapter 7 Bankruptcy
Deciding to file Chapter 7 bankruptcy is a serious matter with a number of possible benefits and consequences. The best way to approach bankruptcy is as a one-time last resort and to try to avoid escalating debt situations in the future. However, bankruptcy exists for a reason and filing a case when debt has become too much to handle can be the right thing to do depending on the situation.
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Credit Effects
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A pro of filing Chapter 7 bankruptcy is you will have your debts reflect no balance owed on your credit report, which can help when you try to rebuild credit. However, a con is the fact you filed Chapter 7 to resolve your debts and this will also be reflected on your credit file for 10 years.
Personal Property
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Filing Chapter 7 usually does not mean you lose household goods and other personal property, nor can any lender take your retirement accounts. However, savings accounts, stocks, home equity, expensive vehicles and jewelry, and other items could be subject to seizure to pay your creditors.
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Automatic Stay
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A benefit of Chapter 7 bankruptcy is the automatic stay. While your case is being resolved, no creditor can legally contact you or file court action such as home foreclosure to seek debt repayment.
Credit Counseling
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You are required to get credit counseling prior to filing Chapter 7 and near the end of your case. This can help you learn better debt management strategies for your life after bankruptcy.
Privacy
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A con of bankruptcy is some local newspapers do publish the names of residents who have filed cases. In addition, anyone who knows you could eventually learn that you filed bankruptcy by searching for your name in the court system.
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