Advantages of Filing for Bankruptcy Protection: |
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• The Automatic Stay: Filing for Chapter 13 or 7 triggers an automatic stay against the collection of pre-filing debts, which will delay and may stop foreclosures, repossessions, garnishments, utility shut-offs and debt collection activities. • The Discharge of Unsecured Debts: Both Chapter 13 and 7 eliminate most unsecured debts, such as credit card debt, personal loans and medical bills. • You May Be Able to Keep Your Property By Filing Under Chapter 13: Filing for Chapter 13 rather than Chapter 7 allows debtors, if they have steady income and an acceptable plan to catch up on their debt, to keep property, such as a mortgaged house or car, that might otherwise be lost in a Chapter 7 case. • Fresh Start: The discharge of most unsecured debt will result in a fresh start and enable a debtor to start the process of building good credit. |
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Disadvantages of Filing for Bankruptcy Protection: |
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• Long Term Negative Impact on Credit Score: Bankruptcy information; both the date of filing and the later date of discharge, will remain on a debtor's credit report for ten (10) years and can impact their ability to obtain credit, a job, insurance or even a place to live. • In Chapter 7 -- The Sale of Assets That Are Not Exempt: When a debtor files for Chapter 7, their assets that are not exempt may be sold or turned over to your creditors to pay their debts. Chapter 7 usually does not allow debtors to keep property when their creditor has an unpaid mortgage or security lien on it. • Time Period During Which A Debtor May File For Bankruptcy Again: A debtor who files a Chapter 7 case, must wait eight (8) years after filing before they can file again under that Chapter. Chapter 13 also involves a waiting period of at least two (2) years after filing the first case before they can file again. Any new debts incurred starting on the day after filing for bankruptcy will not be included in the discharge and will remain outstanding. • Not All Debts May Be Discharged: Personal bankruptcy usually does not erase child support, alimony, fines, student loans and most tax obligations. • Co-Signers May Continue To Be Liable: Any co-signer on a debt will continue to be liable even if the debtor has filed for a Chapter 7 bankruptcy, unless they also file for similar protection. If the debtor filing a Chapter 13 petition agrees to pay in full a debt with a co-signer, the co-signer cannot be pursued for the debt as long as the debtor remains in Chapter 13 and continues to make payments. |
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