Last week, we put out a short list of some of the pros and cons of filing Chapter 7 bankruptcy. Filing bankruptcy is a huge decision and one that will have several financial implications in the years following. But bankruptcy is also a valuable tool for people who are drowning in debts and have no way out. Here are some more of the benefits of Chapter 7 bankruptcy, as well as some of the downsides.
Pros and Cons of Chapter 7
- Con: It can be almost impossible for someone who files for bankruptcy to get a mortgage, if he or she doesn’t already have one.
- Pro: There are certain lenders who will loan money to people deemed “bad risks,” so it is not impossible. Difficult? Yes. But it can be done.
- Con: You cannot discharge things like child support, (most) student debt, recent back taxes or spousal support in bankruptcy.
- Pro: You will be more able to meet financial obligations like child support, student debt and spousal support by eliminating other debts through bankruptcy.
- Con: There is a period of six years following filing for Chapter 7 (and Chapter 13) that prevents you from seeking this method of debt relief again. As such, you only have one shot with a bankruptcy to right your finances – otherwise, you may be digging yourself deeper.
- Pro: You won’t be risking your job by filing. Under bankruptcy law, employers are not allowed to discriminate against you for filing for bankruptcy.
Chapter 7 can be a valuable tool, but it isn’t for everyone. Some people may be able to benefit more from a Chapter 13 bankruptcy filing instead. We’ll discuss those pros and cons in the coming weeks.