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Can a Chapter 7 bankruptcy cause more debt?

When Illinois residents hear the word bankruptcy, they think debt relief. This is particularly true for Chapter 7 bankruptcy, as this form -- if approved -- results in the complete discharging of certain debts. Is there ever a time when filing for bankruptcy can actually cause a person to take on more debt after the fact?

There is a trade-off when filing for Chapter 7. Yes, one may achieve some level of debt relief; various debts may be wiped clean off one's record. However, credit scores take a big hit, making it difficult to obtain credit either at all or with decent interest rates. So, if one is not careful about finances after filing for bankruptcy, he or she could end up basically trading one debt for another.

It is believed that over 700,000 Americans filed for bankruptcy in 2017. Why? The big reasons were job loss, credit card debt and medical expenses. All of those people will now have the bankruptcy listed on their credit reports for seven to 10 years. If they find lenders willing to give them loans, they are likely to pay quite a bit more than those individuals who have better credit scores.

At the end of the day, it is all about finding balance. When debts are so bad and help is needed, there is nothing wrong with pursuing bankruptcy -- whether it is a Chapter 7 or 13. One just needs to find balance when all is said and done as to avoid being caught in a debt trap again. With the assistance of legal counsel, Illinois residents can look at all of their debt relief options and pursue the one that will help them both now and in the long term.

Source:, "Here's How Much Borrowers Pay on Loans After a Bankruptcy", Chris Neiger, April 21, 2018

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