To File Or Not? How To Make The Chapter 7 Bankruptcy Decision

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Deciding whether to file for Chapter 7 bankruptcy is a significant financial decision that should be carefully considered. Read below and consider the factors that consumers typically take into account when making this decision.

• Level of Debt: Assess the severity of your debt situation. Chapter 7 bankruptcy is generally suitable for individuals with substantial unsecured debts, such as credit card debt, medical bills, or personal loans, that they are unable to repay. If your debts are overwhelming and you have no feasible means of repayment, bankruptcy may be an option worth considering.
• Income and Budget: Evaluate your income and expenses to determine if you have sufficient income to meet your basic living needs after discharging your debts through bankruptcy. Chapter 7 bankruptcy involves liquidating non-exempt assets to repay creditors, but it also provides a fresh start by eliminating most unsecured debts. If your income is insufficient to cover your essential expenses, it may indicate that Chapter 7 bankruptcy could be a viable solution.
• Exempt Assets: Consider the assets you own and their exemption status in bankruptcy. Chapter 7 bankruptcy allows for certain exemptions, which vary by state. Exempt assets are protected and not subject to liquidation to satisfy debts. If you have few valuable assets or if the value of your assets is within the allowable exemption limits, filing for Chapter 7 bankruptcy may be less disruptive to your financial situation.
• Credit Consequences: Understand the potential impact on your creditworthiness. Filing for Chapter 7 bankruptcy will negatively affect your credit score and stay on your credit report for many years. However, if you are already struggling with overwhelming debt and late payments, your credit may already be compromised. Bankruptcy provides an opportunity for a fresh financial start and the ability to rebuild your credit over time.
• Alternatives and Counseling: Explore alternatives to bankruptcy. Consider options such as debt consolidation, negotiation with creditors, or enrolling in a debt management program. It may be beneficial to consult with a credit counselor or a bankruptcy attorney who can provide guidance on the available alternatives and help you evaluate the best course of action.
• Talk to a Lawyer: Seek advice from a bankruptcy attorney. They can assess your specific financial situation, explain the legal implications of filing for Chapter 7 bankruptcy, and guide you through the process. An attorney will help determine if bankruptcy is appropriate for your circumstances and assist in navigating the complex legal requirements.

For more information, contact an attorney near you.

3 August 2023