Last week, this blog discussed the pros and cons of Chapter 13 bankruptcy. This week, we will discuss Chapter 7, another form of personal bankruptcy.
Chapter 7 bankruptcy is different from Chapter 13 for numerous reasons and comes with significant pros and cons. It is important to fully understand what you are getting into before making a decision.
Compared to Chapter 13, Chapter 7 provides faster and more extensive debt relief. However, Chapter 7 will also limit your ability to acquire new loans in the future. In addition, your credit score will be severely affected, although if you are already considering Chapter 7, more often than not you are already struggling with your credit. The bankruptcy will remain on your credit score for up to 10 years. In addition, you will lose all your credit cards, and will unlikely be able to obtain a mortgage for the foreseeable future.
There are a few fees associated with filing for Chapter 7 bankruptcy, including a $220 case filing fee, a $15 trustee surcharge, and a $39 administrative fee. All fees are expected to be paid at the time of filing with the clerk, however an exception made be made with the court’s permission, allowing the filer to pay in up to four installments. For extreme cases, if a filer’s income falls below 150 percent of the poverty level, the fees may be made at the court’s discretion.
There is much to consider before applying for Chapter 7 bankruptcy. To protect yourself, your finances, and your future, it may be in your best interests to speak with a professional familiar with Chapter 7 bankruptcy to look at your financial situation and determine whether it is right for you. The decision could make all the difference in the world.