What happens when you file for Chapter 7 bankruptcy?

On Behalf of | Apr 24, 2023 | Bankruptcy, Chapter 7 |

At some point, many Florida residents have to deal with debt. Although some may find it easy to settle, others can struggle and have no choice but to file for bankruptcy. Chapter 7 is one of those options; this is what to expect when filing.

Chapter 7 bankruptcy explained

Chapter 7 bankruptcy allows people to discharge their debts so they can start fresh with their finances. To qualify, you must pass what’s known as the means test; your income must be under the median and you must have no foreseeable way to pay off your debts.

Chapter 7 is also known as liquidation bankruptcy as it involves liquidating some of your assets to pay back your creditors. The court assigns a bankruptcy trustee to your case to oversee things. Unsecured debt like credit card debt, medical bills and personal loans are discharged with Chapter 7 bankruptcy, which means creditors cannot try to collect on them.

Pros and cons of Chapter 7 bankruptcy

Filing for Chapter 7 bankruptcy carries some advantages. One of the most notable is that debts can be discharged within as little as three to six months. If you have dealt with calls from collection agencies, you will no longer have to worry about those harassing calls; Chapter 7 bankruptcy makes it illegal for collectors to continue contacting you.

A disadvantage of Chapter 7 bankruptcy is that it doesn’t eliminate all your debts. Your credit score can also decline as the bankruptcy remains on your credit report for 10 years. This can prevent you from qualifying for some loans for a period of time. You also cannot file for Chapter 7 bankruptcy again for eight years. If you want to file for Chapter 13 bankruptcy, you must wait four years after your Chapter 7 case ends.

Chapter 7 bankruptcy is not necessarily for everyone. However, if you qualify, it might help alleviate your debt and allow you to start anew.