>> The Benefits of Choosing a Chapter 7 Bankruptcy
>> The Disadvantages of choosing the Chapter 7 Bankruptcy route
Dan Drucker* Chapter 7 bankruptcy is a powerful option available for people who find themselves in an unsustainable financial situation that they must resolve in order to move forward with their lives.
News reports frequently carry stories about those ‘entering Chapter 7’, a recent example being the bankruptcy of Cleveland restaurateur Jonathan Sawyer, but US figures show that consumer bankruptcy filings from 2006 until 2017 showed over 12 million consumer bankruptcy petitions were filed in the United States.
That is a very big number.
Most bankruptcies in the United States are filed under either Chapter 7 or Chapter 13 bankruptcy. There are key differences between the two. Chapter 13 is a reorganization bankruptcy designed for debtors with an income position that provides enough each month to pay back at least a portion of their debts through a repayment plan.
However Chapter 7 is more dramatic in that it is a liquidation bankruptcy that wipes out most of the debtor’s general unsecured debts such as credit cards and medical bills without the need to pay back balances through any repayment plan.
But what are the pros and cons of Chapter 7?
A filing under Chapter 7 can be a very effective way to give the debtor a new start by eliminating a wide range of debts, giving you the financial ability to focus on the next steps in your life without being burdened by these overwhelming debts, interest rates, and collections agencies.
As a chapter 7 attorney it is clearly important to way up the pros and cons of a bankruptcy action and to ensure you are taking the best steps toward securing your financial future. This requires applicants to tie up every loose end to ensure that there are no additional problems that you run into as you are trying to resolve these past issues and focus on moving forward free from debts.
While Chapter 7 Bankruptcy is, for many people, a way to get their life back on track and begin focusing on the future, there are a variety of cons that one must consider before making this decision for their own situation.
Take a look at some of the following issues to consider before you make this decision for yourself, and again, make sure that you work with an experienced chapter 7 lawyer in order to make sure that you are doing everything properly and that you will not have any issues come back to haunt you when you believe that you are in the clear.
The Benefits of a Chapter 7 Bankruptcy
The following are just a few of the general benefits of Chapter 7 bankruptcy, and likely do not cover all of the ways that it will positively impact your own life. Additionally, not all of these benefits may apply to your situation, so in order to make sense of what you can expect, work with an attorney.
Automatic Stay From Debt Collections
Once you file your Chapter 7 bankruptcy, something known as an “automatic stay” is put in place, which means that debt collection companies will no longer be able to contact you about the debts that they are attempting to collect. The length of time for an automatic stay varies depending on your history of bankruptcies.
Immediate Debt Relief
Once your Chapter 7 filing is confirmed, you will be relieved of things like personal loan debts, credit card debts, medical bills, lawsuits, and outstanding home utility bills. However, it is important to recognize that there are a variety of debts that are exempt from relief in a Chapter 7 filing, including student loans and certain tax obligations, as well as child support and alimony payments.
No More Wage Garnishing
If your wages have been garnished in order to repay certain debts or obligations, this will cease as soon as your bankruptcy is filed and you will be able to take home the full amount of the wages that you have earned.
the Cons of Chapter 7 Bankruptcy
The benefits are significant when it comes to filing for Chapter 7 bankruptcy, but it would be dishonest to avoid some of the cons that come with this legal tool and which need to be considered carefully by those looking at their Chapter 7 bankruptcy options.
No Relief from Student Loans
If your student loan repayments are an issue that you are seeking relief from, filing for bankruptcy will not help. Student loans are one of the few debts that are exempt from the benefits of a bankruptcy filing.
Impact to Good Credit
If you have a good credit score, you can expect that it will go down after you file for bankruptcy. However, if you have poor credit then you can expect that your credit score will increase once you file.
You May Need to Forfeit Certain Assets
Filing for Chapter 7 does not mean that all of your debts magically disappear with no repercussions, and if you have certain assets that can be used to repay your debts then they may be forfeited to your debtors.
*Dan Drucker writes on consumer and legal rights.