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Advantages/Disadvantages: Filing Chapter 7 for Your Warwick Bankruptcy

by Mark Buckley

For Warwick consumers struggling with heavy debt, filing for bankruptcy relief is an option when there is not enough money to pay all of your bills.  Job loss, illness, divorce, or loss of overtime are the typical reasons for financial chaos.  Typically, income has dropped, expenses have increased, or a combination of both.  If you don’t earn enough money to pay your creditors, a Chapter 7 bankruptcy may be the best chance for your debt-relief.  Here are several advantages and disadvantages to consider.

Advantage: You may become debt-free in only a few months

Typically, your Warwick bankruptcy takes three months to complete.  A Chapter 13 bankruptcy, however, is typically a 5-year process.  The power of filing a Chapter 7 bankruptcy, therefore, is getting immediate debt-relief and not wasting years with a crippling payment plan.  The quicker you file a Chapter 7 bankruptcy, the more money you save, and the faster you can rebuild a better financial future.  A successful Chapter 7 bankruptcy should destroy most of your unsecured debt.  Debts like credit cards, medical bills, utility bills, car repossessions, mortgage foreclosures, payday loans, and personal loans.

Disadvantage: Filing bankruptcy may lower your FICO credit score

You credit score is based on several factors, like your debt to income ratio, credit usage rate, payment history, etc.  If you are 100% current on all credit accounts, it is true that filing bankruptcy could reduce your credit score.  Most people who are in financial trouble, however, are already maxed out on credit and have missed payments.  In other words, their credit score was already damaged before calling their Warwick bankruptcy lawyer.  The good news is that bankruptcy can help you salvage what is left of your credit and begin the process of rebuilding your FICO score.  I even enroll my bankruptcy clients in a powerful credit rebuilding program.  Most have seen their credit scores reach 720 in as little as 12-18 months after the bankruptcy discharge is issued.

Advantage: Rhode Island and Federal bankruptcy exemptions help protect your property

If you have lived in Rhode Island for at least 2 full years, you can use RI bankruptcy exemptions to protect most, if not all of your assets.  Most Warwick bankruptcy filers, however, can choose Federal bankruptcy exemptions instead of state exemptions.  Under RI law, a homeowner can protect up to $ 500,000 in equity so long as she has owned the property for 40 months.  Under Federal law, $23,675 of equity in your home can be protected, or $ 47,350 if the property is co-owned with a spouse who is jointly filing. There are also exemptions for protecting vehicles, household goods, jewelry, retirement accounts, etc.  There is even a potential “wildcard” exemption to help protect additional assets, like cash, collectibles, or bank accounts.  While every case is different, the clear majority of Warwick bankruptcy cases filed do not involve surrendering any property.  A good bankruptcy lawyer can let you know, prior to filing, if there is any property at risk.

Disadvantage:  Your open credit card accounts will be shut down

Because your bankruptcy filing will be on your credit report, all creditors will proactively close your credit accounts.  Even if you have a small balance and are current, it will be closed once your Warwick bankruptcy case is filed.  You are not allowed to keep certain credit accounts off of your list of creditors in the bankruptcy petition.  The positive news, however, is that those who wish to rebuild their credit typically receive credit offers within 6 months’ after bankruptcy.  I’ve had clients buying cars within one year and houses within 3 years of filing.

Advantage: A Chapter 7 bankruptcy will stop all debt collection activity immediately

The moment I file your bankruptcy petition, all debt collection calls, letters and lawsuits will stop.  No more stressful and harassing phone calls throughout the day.  No more calls to your house, your employer, your neighbors, or your relatives.  A bankruptcy filing will even stop a foreclosure or credit card lawsuit.  Bottom line, bankruptcy is designed to help get your financial house back under control and to provide a start fresh.

There are pros and cons for each person considering bankruptcy.  To determine if a Chapter 7 bankruptcy is right for you, contact a reputable bankruptcy attorney and ask about all debt-relief options.  Start by gathering basic financial documents, like pay stubs, tax returns, and credit reports and call for a free consultation.

To find out more about the pro and cons of bankruptcy from Attorney Mark Buckley, call 401 467-6800 now for a free bankruptcy consultation.  Serving clients in Warwick and all communities throughout Rhode Island.

Filed Under: Blog

About Mark Buckley

Estate Planning, Consumer Bankruptcy, and debt-settlement attorney licensed in RI & MA. I am the only bankruptcy lawyer who is a CERTIFIED FINANCIAL PLANNER professional.

To plan your estate, or resolve debt concerns, call me at (401) 467-6800.

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