Filing for bankruptcy can feel overwhelming, but it may also offer a fresh financial start. For individuals and families in Missouri struggling with debt, Chapter 7 bankruptcy is one of the most common paths toward relief. But like any major decision, it’s important to understand both the advantages and the drawbacks before moving forward.
In this post, we’ll walk you through the key pros and cons of filing a Chapter 7 bankruptcy petition—and what it could mean for your future.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is sometimes called “liquidation bankruptcy.” It allows individuals to eliminate most unsecured debts—such as credit cards, medical bills, and personal loans—quickly and without a repayment plan. A court-appointed trustee reviews your assets, but many people are surprised to learn they can keep most, if not all, of their property thanks to Missouri bankruptcy exemptions.
Pros of Filing Chapter 7 Bankruptcy
1. Eliminates Most Unsecured Debts
The biggest benefit of Chapter 7 is the chance to discharge most of your unsecured debt. That means no more phone calls from creditors or collection letters piling up in the mailbox.
2. Quick Debt Relief
Unlike Chapter 13, which involves a 3–5 year repayment plan, most Chapter 7 cases are completed in just 4–6 months.
3. Automatic Stay Protection
As soon as you file, an “automatic stay” goes into effect. This court order stops creditors from garnishing your wages, suing you, or shutting off your utilities.
4. You May Keep Most of Your Property
Many clients are relieved to learn that they won’t lose everything in a Chapter 7 case. Thanks to Missouri’s generous exemption laws, you can usually keep essentials like:
- Your home (up to a certain equity amount)
- Your car
- Household goods
- Retirement accounts
A knowledgeable bankruptcy attorney in Joplin can help make sure you get the full protection you’re entitled to.
5. A Fresh Start and Credit Rebuilding
It’s true that bankruptcy impacts your credit—but for many, it’s the first step toward rebuilding it. You can begin improving your credit score immediately after discharge by:
- Opening a secured credit card
- Paying bills on time
- Keeping low balances on any new lines of credit
Many people see noticeable improvement in their credit within a year.
Cons of Filing Chapter 7 Bankruptcy
1. Credit Score Impact
A Chapter 7 bankruptcy will appear on your credit report for up to 10 years. While that sounds long, many individuals begin qualifying for new credit, including car loans or even mortgages, much sooner than they expect.
2. Not All Debts Are Discharged
Chapter 7 won’t eliminate certain debts like:
- Student loans (in most cases)
- Child support or alimony
- Recent taxes
- Court fines or restitution
You’ll still be responsible for these obligations even after your bankruptcy is complete.
3. You May Lose Non-Exempt Property
If you own valuable assets that aren’t protected under Missouri’s exemption laws—such as a second home, expensive collectibles, or extra vehicles—the court may require you to sell them to repay creditors.
4. You Must Qualify
Chapter 7 isn’t available to everyone. You’ll need to pass a means test that examines your income, expenses, and financial situation. If you make too much, you may need to consider Chapter 13 instead.
4. Important Potential Pitfalls to Be Aware Of:
It is important to understand that some action taken prior to filing bankruptcy can affect your case in the event you do file for Chapter 7 bankruptcy. You want to speak to an attorney before you do any of the following:
- transfer an asset such as a car boat
- pay back family members for money you may owe them
- remove your name from any title to property such as a home or vehicle
- open new credit accounts, or use credit accounts just prior to filing
Note: Some of the above can be done in very specific situations while not being a problem, however, in most cases, doing one or more of the above could cause problems for an individual while filing a Chapter 7 petition. It’s important to consult with an attorney before making significant financial decisions while contemplating bankruptcy.
What can happen if you make the wrong decisions to do any of the above? You could potentially lose an asset, or have to return funds back to the bankruptcy court, and in very bad situations, either be left with the inability to file at all, or have a filing revoked where there was any fraudulent activity.
Should You File Chapter 7 Bankruptcy?
Chapter 7 can be a powerful tool for wiping the slate clean and taking control of your financial future. It offers fast relief, protection from creditors, and the chance to rebuild your credit over time.
But it’s not the right solution for everyone. That’s why it’s important to speak with an experienced Chapter 7 bankruptcy attorney in Joplin, Missouri, and reach out to Flex Legal Group for a free consultation. We can review your situation, explain your options, and guide you every step of the way.