Posted on: 2 January 2020Share
Choosing to file for bankruptcy means making a big choice in your life that you need to think through carefully. A bankruptcy filing affects your finances now and well into the future, so you want to make sure you're considering all the pertinent factors before deciding on whether and how to file for bankruptcy.
The following are six things to think about before you file chapter 7 bankruptcy:
Whether you're eligible for chapter 7 bankruptcy
You have to meet certain requirements to be eligible for chapter 7 bankruptcy. For example, you need to earn less than the median income in your state. Also, you need to have debts that equal over half of the amount of money you make every year.
There are additional requirements you may need to meet to be eligible depending on your state of residence and your income level.
Your ability to eventually repay your debts
Generally speaking, a consumer should only be filing for chapter 7 bankruptcy if it is impossible for them to repay their debts.
Filing for bankruptcy will negatively impact your credit score for years to come, so it's best to repay your debts if at all possible so you don't have to struggle with poor credit well into the future.
Which possessions you'll have to give up
You may have to give up some of your possessions if you decide to file for bankruptcy. For example, filing for Chapter 7 bankruptcy can often mean losing your home and your vehicle. If you have any other large possessions like a boat, you will likely lose them if you decide to file for bankruptcy.
How much you'll pay to file for bankruptcy
Remember that it costs money to file for bankruptcy. The most basic expense is a filing fee of $335 for those who file for chapter 7 bankruptcy.
However, a chapter 7 bankruptcy will cost you significantly more than just the filing fee if you file with the help of a bankruptcy attorney. In this case, attorney fees will likely cost over $1,500.
Your ability to qualify for free legal help
Because attorney fees for bankruptcy filing can be so high, you should take advantage of any free or discounted legal help that is available.
Your city may have a Consumer Bankruptcy program or another similar service for consumers with low incomes. Such programs generally provide free legal services that consumers can rely on for sound advice regarding their financial situation.
Your credit score
It's important to consider how your bankruptcy filing will impact your credit score. Some consumers may find that their chapter 7 bankruptcy filing doesn't have a big impact if they already have a history involving late payments and defaulted credit accounts.
However, chapter 7 bankruptcy law generally pulls down a credit score significantly. It's important that consumers understand that they are unlikely to qualify for large loans with advantageous interest rates for a long time after filing for bankruptcy.