There are both positives and negatives to filing for Chapter 7 bankruptcy. Here are a few positives to consider. First, you’ll be able to start over with a fresh financial start. You can have unsecured debts dismissed and gain freedom from those debts in around three to six months. Instead of continuing to miss payments, which hurts your credit, you can eliminate the debt that holds you back.
Many things fall under exempt status in Chapter 7 bankruptcy, so you may be able to keep your home, car or other items. The point of a bankruptcy isn’t to make you start over completely, but to make sure you have what you need to start fresh.
Of course, there are some negatives to filing for Chapter 7 bankruptcy as well. First, you will lose any property that doesn’t fall under exempt status. Some of your luxury possession are likely to be sold. Bankruptcy also ruins your credit for a number of years. It’s possible to start building it back up soon after your bankruptcy, even though the bankruptcy itself stays on the credit report for up to 10 years.
You will also lose all your credit cards. This is one of those factors that is both good and bad. It’s good, because you can’t get back into debt, but it’s bad because you don’t have the credit if you need it. There are companies that work with high-risk credit, so there’s a chance you can get a card within a few years. Focusing on making payments on time will help you improve your credit quickly.
Source: FindLaw, “Pros and Cons of Declaring Bankruptcy under Chapter 7,” accessed March 24, 2017