A Chapter 7 bankruptcy offers a clean slate, free from liabilities. Filing for it can wipe away many types of debt, such as credit card charges, medical expenses and personal loans, giving you a chance to rebuild. However, certain debts, like student loans and most taxes, are not dischargeable under Chapter 7 bankruptcy.
While Chapter 7 can offer relief, it’s not a decision to be taken lightly. There are certainly benefits to filing for it, but there are also serious consequences. Here are four important impacts to consider.
The negative impact on your credit
A Chapter 7 bankruptcy can seriously impact your credit. Most potential lenders, landlords, and even some employers can see the bankruptcy on your credit report, which can linger there for up to 10 years. This could lower your credit score and affect your ability to obtain credit, rent housing, or secure certain employment opportunities.
The silver lining is that the impact on your credit lessens over time, and you can start rebuilding it even while the bankruptcy is still on your report.
Loss of most of your property
In a Chapter 7 bankruptcy, the trustee can sell your non-exempt property to repay your creditors. Non-exempt property can include valuable items like a second home, stocks or money in bank accounts.
Fortunately, Maryland has exemption laws that allow you to keep some property. These can include some equity in your home, necessary clothing, household appliances, and essential tools or equipment needed for your profession.
Potential hit to privacy and reputation
Filing for bankruptcy is public, meaning that once you file, the details of your bankruptcy become accessible to the public. Curious individuals, potential employers, or lenders can uncover details such as the fact that you filed, the chapter under which you filed and the outcome of your bankruptcy. This public access to your financial history can raise privacy concerns.
No access to future bankruptcy filings
If you’ve gone through a Chapter 7 bankruptcy and had your debts wiped out, you must wait eight years from your first filing date before you can file again. So, if you run into money problems within those eight years, you won’t be able to use Chapter 7 bankruptcy to discharge your debts.
Chapter 7 can be a lifeline in difficult times, but it’s crucial to be aware of its consequences. If the process seems complex, consider consulting an attorney to get help with your specific situation.