Bankruptcy is designed to provide a solution for anyone who feels completely overwhelmed by their debt and doesn’t see any other solution. While bankruptcy is a useful tool that can assist people with lifting themselves out of debt, there are pros and cons of filing bankruptcy that you should know about when considering filing a Chapter 7.
The Pros and Cons of Filing Bankruptcy in Missouri
Firstly, what are the advantages of filing for bankruptcy?
1. An immediate ‘automatic stay.’
Filing for bankruptcy legally halts all communication from debt collectors. This legal protection from creditors is referred to as an ‘automatic stay.’ In the state of Missouri, debt collectors can be penalized by the court if they attempt to contact you despite this legal protection. If creditors call, just tell them you are filing bankruptcy and give them your case number.
2. Filing is the first step towards improving your credit score.
The majority of people who file for Chapter 7 bankruptcy in Missouri possess a credit score that is lower than 600 and since people who choose to file bankruptcy are essentially given a clean slate, you can consider filing for bankruptcy the first step on your path to an improved credit score.
After you file, you can improve your credit score by:
- Creating and adhering to a budget.
- Using a fixed credit card.
- Being an official user on another person’s card.
Using the tips above can help you build yourself a healthier financial future.
3. Stop a foreclosure, a tax sale or an eviction.
Other benefits of the automatic stay include stopping a mortgage foreclosure, a tax sale of your residence or an eviction.
And what are the downsides of filing for bankruptcy?
1. Certain debts cannot be erased by bankruptcy.
There are certain debts that cannot be erased by bankruptcy. These debts include: government judgements and penalties, special tax obligations, student loans, child support and divorce payments. When considering tax debts, the only debts that are eligible for elimination through bankruptcy are debts older than three years. However, to receive this benefit, you must show that you were not deliberately avoiding paying your taxes.
2. The fact that you filed bankruptcy will be visible on your credit report for 10 years.
This means that for 10 years anyone who views your credit report will know that you filed bankruptcy. In addition, your erased debts may be visible. As such, attaining a mortgage following bankruptcy is unlikely.
3. Expensive property may be vulnerable.
The majority of people who file Chapter 7 do not own any property that is susceptible under this chapter, which is why these cases are referred to as “no-asset cases.” Nonetheless, individuals interested in filing Chapter 7 bankruptcy who do own property need to find out if their property is exempt prior to officially filing. In the event that the property is not exempt, the individual needs to decide if he or she is willing to sell it.
4. Your co-signers/co-debtors are still liable.
Debts can be shared and the co-debtor is usually a spouse; however, there are times when the spouse is not the co-debtor, regardless, both you and your co-debtor are responsible for the debt. Once the Chapter 7 bankruptcy is filed, your co-debtor is notified, therefore, if you have any shared debts that you are including in your bankruptcy, it is vital that you let the co-debtor know you intend to file.
Filing Chapter 7 bankruptcy in Missouri
Once you are prepared to file, a meeting is scheduled with a bankruptcy trustee. This meeting is referred to as a ‘341 Meeting’ or the ‘Meeting of Creditors.’ At this meeting, the trustee will ask about any transfers you made that might be viewed as suspicious. If any property transfers that have been ‘hidden’ from the trustee are discovered, the trustee can stop the transfer and take the ‘hidden’ property back. The property is sold and the proceeds are used to pay on your unsecured debt.
If you have minimal assets, Chapter 7 bankruptcy may be the way to find relief from your debt. After filing a Chapter 7 bankruptcy, you can eliminate your debt and begin improving your credit score.
Now that you know some of the pros and cons of filing bankruptcy, you can determine if bankruptcy is something you want to consider. If you reside in or around Springfield, Missouri, and you are considering Chapter 7 or Chapter 13 bankruptcy, contact The Piatchek Law Firm, LLC, at 417-882-5858 to schedule your complimentary initial consultation with our Springfield, Missouri bankruptcy attorney who can help you determine if a Chapter 7 or Chapter 13 bankruptcy meets your needs the best.
