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December 15,2020

Factors to Consider When Deciding to File for Chapter 7 Bankruptcy

Chapter 7 bankruptcy can be a difficult prospect to consider. There are practical concerns about filing, ensuring your debt is discharged successfully, and the effect that a bankruptcy will have on your credit. There can also be legal complications with your eligibility for filing, or the debts that can be discharged, or legal objections a creditor might make to your bankruptcy petition. An experienced California bankruptcy lawyer can help explain the process and help you determine the best option for debt relief in your particular situation. If you are considering Chapter 7 bankruptcy, here are some factors to consider:  

The Return on Investment

There are some costs associated with a Chapter 7 bankruptcy. The court has filing fees, your attorney will have his or her fees, and there could be administrative costs associated with getting the proper paperwork together. But these costs usually pale in comparison to the benefit of bankruptcy. For an investment of approximately $1000 to $3000, you can discharge far more in debt. 

Imagine, for example, that you had $50,000 worth of old debts on credit cards. The expense of filing a bankruptcy case would be a wise investment to get rid of all this debt. Consider the return on investment if you are concerned about the cost of filing a bankruptcy case. Also, remember that carrying continued debts will subject you to added late fees, penalties, and other costs. 

The Benefits of Chapter 7 Bankruptcy, “Modest Means Bankruptcy”

 Unlike a Chapter 13 bankruptcy, a Chapter 7 bankruptcy requires no repayment plan. This means that you do not have to spend years making faithful payments that are reported to the court in order to earn a discharge of your bankruptcy. Once your attorney proves that you and your debts are eligible, the court will order your debts to be discharged. This relieves you of the ongoing burden of a court-ordered repayment plan. 

 It also means that a Chapter 7 bankruptcy is much faster than a Chapter 13 bankruptcy. Instead of waiting years to complete your payment plan, you will only have to wait for the case process to be completed. In approximately a couple months, you could be free of any legal obligation to repay your debts. 

How Continued Debt Will Affect Your Credit

 Many people are worried about the effect that a bankruptcy will have on their credit. It is true that bankruptcies are reported to the credit bureaus for a period of ten years after they are filed, and that this can affect your ability to access credit and other financial services. But many people fail to consider the effect that debt has on their credit, as well. 

 If you continue carrying debt and bad accounts on your credit report, this, too, will have a negative impact that can affect your financial future for years to come. In many cases, the consequences of carrying bad debt are worse than declaring bankruptcy. While bankruptcy has some negative financial consequences, it also allows you to have a fresh start and build good credit once again. That means, with good use of your fresh start, you will be in better financial health than if you had failed to act.

Experienced Bankruptcy Lawyers Serving Northern California

 The experienced bankruptcy attorneys at Miranda, Magden & Miranda, LLP are here to help. Contact us to schedule a consultation. We offer two convenient office locations in Salinas and Monterey.

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