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How does Chapter 7 bankruptcy affect your future?

On Behalf of | May 29, 2017 | blog, Firm News

Are you hesitant to file for bankruptcy because you are worried about how it will affect your future? The good news is that most negative consequences are temporary and far better than the long-term effects of remaining in considerable debt.

Knowing how your bankruptcy influences your future financial circumstances can relieve your concerns and help you make the right decision for your situation.

The short-term effects of Chapter 7 bankruptcy

The immediate consequences of bankruptcy are mostly positive. Filing stops creditor harassment, repossession of assets, wage garnishment and home loss. It also eliminates the majority of your debt, which gives you increased cash flow. The only immediate negative effect is the significant decrease in your credit score.

The long-term effects of Chapter 7 bankruptcy

Although your credit score may be very low, it will not last forever. In fact, with the right actions, you can quickly rebuild your credit and reach a score higher than you have ever had. The fact that you are no longer in debt can also work in your favor. However, you are likely to receive high interest rates until you have a solid credit history again, which may take years.

Chapter 7 does not get rid of all debts, so you may lose some property unless it qualifies for exemption. If you face financial struggles again within six years, you cannot file for Chapter 7, but you do have the option of filing for Chapter 13.

As for work, a bankruptcy usually will not affect your job. Your employer cannot fire or demote you based on bankruptcy. Government agencies cannot dismiss your application, but private businesses can. It likely will only be a problem if you are seeking a position that handles money, such as management or accounting.

How to limit the effects of Chapter 7 bankruptcy

Many of the consequences you will face will depend largely on how you approach your bankruptcy and recovery. You can raise your chances of success by speaking to an experienced bankruptcy lawyer, who can give you the best guidance for your circumstances.

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