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What to consider before filing for Chapter 7 bankruptcy

Taking the decision to file for bankruptcy is a huge step. It means that you have accepted the extent of your financial issues and that you are committed to changing your life for the better. Many people spend months or even years in denial about the extent of their financial problems, but when they finally decide to address them, their situation usually begins to improve.

This is not to say that taking action to file for bankruptcy is always a wise choice. It's is important that you reflect on your situation carefully and that you choose a bankruptcy Chapter that will compliment your circumstances. The following are certain things that you should consider if you are planning to file for Chapter 7 bankruptcy.

Is it realistic for me to pay off debts using my income?

If you have a steady and significant disposable income, it is possible that with the assistance of budgeting techniques and discipline you will be able to start making progress in paying off your debts. If this is the case, you may want to consider filing for Chapter 13 bankruptcy. This is because Chapter 7 bankruptcy is reserved for those with a relatively low income.

Am I willing to part with a significant portion of my assets?

Chapter 7 bankruptcy involves the process of liquidation. This means that significant assets, including your home, will be subject to liquidation in order to pay back debts. If you are determined to avoid losing your home, you may want to consider other options.

Have I considered alternatives that won't affect my credit score?

Chapter 7 bankruptcy is probably going to negatively affect your credit score. This is why it is wise to only file when absolutely necessary. Consider other options such as creditor negotiation or credit counseling before deciding to pursue a Chapter 7 bankruptcy.

While Chapter 7 bankruptcy may not be the best choice for everyone, it is extremely popular because it offers debtors the possibility to wipe clean all their debts in a matter of months, and gain a fresh start. If you are curious about how Chapter 7 bankruptcy could benefit you, verify whether you are eligible to file.

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