The pros and cons of filing for Chapter 7 bankruptcy

While Chapter 7 may be the most common type of bankruptcy in the U.S., there are pros and cons involved.

The decision to file for bankruptcy is not an easy one. However, severe financial stress forces a significant number of people in Tennessee and across the U.S. to make that choice each year. From credit card debt to extensive medical expenses, it can be difficult for people to recover from financial turmoil. According to the U.S. Courts, 833,515 people filed for bankruptcy from March of 2015 to March of 2016. While there are several chapters of bankruptcy to choose from, 523,394 of the cases filed were for Chapter 7, making this the most common type of bankruptcy. There are certain requirements that people must meet in order to qualify for Chapter 7. For example, people who wish to file for Chapter 7 must have an income that is at or below the state median in order to be eligible.

Fresh start

When people file for Chapter 7 bankruptcy, they are able to wipe away most of their debt and begin with a fresh financial slate. Although there are some expenses, such as school loans, child support obligations and taxes owed to the federal government that cannot be erased in a Chapter 7 bankruptcy, credit cards and other medical debt can be removed.

As a result of having the debts discharged, people run the risk of losing certain property, including their home and cars. In some cases, people can reaffirm their mortgage and loan debt by agreeing to maintain the terms of the loan and continue making payments. Some personal property items, such as furniture, clothes and items needed for work, are also considered exempt from repossession during a bankruptcy case.

Credit score

Having a bankruptcy on your credit record can have a negative effect on your credit report for up to 10 years starting from the date in which the debtor filed, as reported by the American Bar Association. This can make it difficult to obtain loans, purchase property and/or buy vehicles. During this time, it is important for debtors to strengthen their credit score, which can help them reestablish their financial status.

Finding answers to your questions

When you are under financial stress, you may not know where to turn for answers to your financial woes. A bankruptcy attorney in Nashville may be extremely helpful in answering your questions and exploring your legal options. You'll want to consider all of the important factors surrounding your case before you make any decisions regarding your financial health.