Pros and Cons to Consider Before Filing for Chapter 7 Bankruptcy
TRI Writer • July 20, 2019
If creditors are harassing you and you are struggling to make ends meet, you may want to consider filing for Chapter 7 bankruptcy. The Chapter 7 petition asks the bankruptcy court to discharge your debts to create a fresh financial start.
Chapter 7 Bankruptcy: Pros
- Discharged Debts: The last step in the Chapter 7 bankruptcy process is for the petitioner to receive a discharge of all debts included in the bankruptcy. It is essential to note the particular types of debt are not eligible for discharge through bankruptcy. If you aren’t sure if your debts are dischargeable, get in touch with an experienced bankruptcy attorney.
- Credit Repair Can Begin Immediately After Filing: After a person files for bankruptcy, they are typically able to obtain credit cards and auto loans. Most new credit accounts post-bankruptcy will initially require a security deposit. Once secured accounts have rebuilt a positive credit history petitioners usually do not have a problem moving forward with traditional credit options.
- The Chapter 7 Bankruptcy Process is Fast: The bankruptcy process usually takes three to six months, during which time petitioners are required to attend a meeting of creditors. At this meeting, filers answer any questions the trustee may have about their case.
- Filing Bankruptcy Stops Creditors: Filing for bankruptcy immediately stops creditors from calling and harassing you, mailing constant payment reminders and demands, etc. Once bankruptcy has been filed, creditors must only contact you through your bankruptcy attorney or the bankruptcy trustee.
- Filing Bankruptcy Stop Collection Activities: Filing for bankruptcy immediately stops collection activities like repossession, court issued judgments, etc.
Chapter 7 Bankruptcy: Cons
- Negative Mark on Credit Report: A bankruptcy is listed on your credit report for up to 10 years. If your credit score is now strong, bankruptcy will lower your scores. If your credit scores are very low, the bankruptcy will probably help your credit score to improve because your delinquencies and the pull of unpaid debt will be behind you. Your creditors know you are much more attractive as a potential borrower.
- Limited Access to Bankruptcy Protection: With a few exceptions (depending on your case and how bankruptcy law applies in your situation), the number of times you can receive a discharge of debt through bankruptcy is limited. A bankruptcy file who receives a discharge is not generally eligible to file for Chapter 7 bankruptcy again until 8 years after the previous filing (that resulted in a discharge of debt). If you need to file bankruptcy, but it has not been eight years since a previous Chapter 7 bankruptcy filing that resulted in a discharge of debt, ask an experienced bankruptcy attorney if filing for Chapter 13 bankruptcy could be beneficial in your situation.
- Specific Exemptions: When you file your bankruptcy, a competent lawyer will carefully analyze the things you own and evaluate what risks you have to losing something that you don’t want to lose. The government has various laws called exemptions that your lawyer will use to protect things ranging from houses to personal things such as, for example, your wedding ring. In some chapter 7 cases, the debtor chooses to file knowing that he will surrender something to the trustee to distribute to creditors. In other cases where your property may be at risk we discuss strategies to protect those assets which may not be exempt. You should never be surprised if a trustee wants to administer your assets.
- Stress & Shame (an urban myth): There is a required meeting of creditors that is usually only a few minutes long. You must be available to answer questions from the trustee and perhaps a few creditors who have been notified that they may appear to ask you questions (but who usually don’t bother to show up). Some folks who file bankruptcy anticipate they will be given hard time at the meeting. The trustee’s attitude is polite and business like. (S)He will ask you simple questions and wants simple answers. Like anybody else in life, the trustee will treat you with dignity and will expect you to do the same and be cooperative. Normally our clients who have been very stressed by the bill collectors before they file are shocked that the meeting is such a low-stress event. The key to a good meeting of creditors is to tell your lawyer the whole truth in the interview process so there are no surprises that come out at the meeting of creditors.
- Potential Loss of Property: When you purchase something and finance it, or you pledge something as collateral for a loan. Frequently deals can be worked out for you to keep things and pay for them. If you don’t pay the creditor might want to recover and sell the property to apply the money towards the debt. Frequently the property has been lost, trashed, stolen, destroyed, etc. If so, tell your attorney ahead of time. These circumstances are hardly ever a problem.
If you are considering filing for bankruptcy and you need to discuss the pros and cons of filing, please don’t hesitate to get in touch. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only office in Chattanooga with Two! You are in good hands with Kenneth C. Rannick P.C.
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Struggling with debt? Learn seven key signs that it might be time to consider bankruptcy. Kenneth C. Rannick P.C. offers legal guidance to individuals in Chattanooga ready for a financial fresh start.
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Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses? In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.