The Benefits of Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is one of the most popular forms of bankruptcy for many different reasons. Although the laws changed in 2005, it is still one of the only ways to completely satisfy most creditors, retain some of your own property and get a fresh start. Let’s take a look at just a few of the benefits that Chapter 7 bankruptcy has for individuals that are struggling with debt.

Complete Discharge of Debt

One of the reasons that Chapter 7 bankruptcy is so popular is due to the fact that you can completely discharge most of your debts. Unlike Chapter 13 bankruptcy, you do not have to work out a repayment plan with your creditors. Available assets and property are liquidated but you will be able to retain exempt property and assets.

No Minimum Requirements

Chapter 7 bankruptcy does not have any minimum requirements for the amount of debt owed before bankruptcy can be filed. Even if you owe only a few thousand dollars to a few creditors, you can use this form of bankruptcy. It is ideal for those who have lower incomes and no assets, but works well even for those in a higher income bracket.

Creditors Have No Claim on You Following a Filing

Dealing with creditors is incredibly stressful. The constant phone calls, letters and harassment can take its toll on anyone. Once you have filed Chapter 7 bankruptcy, they will no longer be able to contact you. You will get a fresh start. For those who have been hounded and cannot see their way clear to paying off their debts, this is often the best solution.

Fast Process

Unlike more complicated forms of bankruptcy, Chapter 7 is quite fast. You must supply a list of your current creditors and the amounts you owe to each, as well as an itemization of your income, assets and monthly expenses. Once the court has determined your inability to pay back your debts, your request for bankruptcy will be approved and you can get on with your life.

Considerations

While there are many benefits to this type of bankruptcy, there are some things to consider before you file. If you do own property, you may lose it if it is liquidated to pay your debts. In addition, if you have any loans that were co-signed by another party, they may be responsible for those debts. Corporations and partnerships may not enjoy complete disbursal of debts, but they may have some relief with this form of bankruptcy.

The Help You Need

Before you file for any type of bankruptcy, it is important to consult with a qualified attorney. Never attempt to file on your own. You could be losing valuable property and you may not be able to take advantage of all of the benefits that this type of bankruptcy has to offer. Anytime you file for bankruptcy there are serious legal and financial implications. It is best to have the advice and assistance of an attorney who can guide you through this process from beginning to end.

Advantages of Chapter 13 Bankruptcy

With the changes in bankruptcy law in 2005, Chapter 13 bankruptcy quickly became much more popular. Although it does not completely discharge past debts, it does provide consumers with a means to get out of debt in a shorter period of time, stop creditor actions and keep the property they own. There are many advantages to Chapter 13 bankruptcy, particularly for those who have a limited amount of debt.

Getting out of Trouble Quickly

Chapter 13 bankruptcy is designed for consumers who need help quickly. Once you file for this type of bankruptcy, creditors may not proceed with any collections efforts. If your home is danger of being foreclosed, this type of bankruptcy can stop that action before it occurs. Although you are still responsible for your debts and must pay them off within a set period of time, this action will provide you with respite and the chance to get back on your feet.

Protection for Co-Signers

Many forms of bankruptcy, including Chapter 7, may put any co-signers you have had in the past at risk. Chapter 13 includes protection for these co-signers so that they are not made entirely responsible for your debt. You will have a chance to pay off what you owe without putting them at risk for collections.

Simplifies Repayment

Instead of having to deal with individual creditors and high interest rates, Chapter 13 bankruptcy allows you to consolidate everything into one easy payment. This makes it easier to get out of debt quickly and can actually save you money in interest rates over time.

Short Life on Your Credit Report

Most forms of bankruptcy will remain on your credit report for a period of 10 years. This means that they can have negative implications on your credit score for many years to come. With Chapter 13 bankruptcy, this information will only remain on your report for a period of 7 years.

Considerations

While there are many benefits to this type of bankruptcy, it is important to look at all sides of the issue. If you have low income, you will be given 5 years to pay off all your debts. If your income is higher, this is shortened to 3 years. While it is useful in terms of stopping collections and further actions against your property, it does require dedication and financial commitment to pay off your debts that quickly.

Things to Keep in Mind

Before you decide to file for any type of bankruptcy, it is essential to have proper legal advice. While you certainly can file on your own, there are heavy financial and legal implications that you may experience. A qualified bankruptcy attorney will be able to assist you in determining which kind of bankruptcy is right for you, whether it is necessary and what benefits you can realize from such a filing. They can also assist you in protecting your assets and getting the help you need before it is too late.
If you are in debt and running out of options, consulting a bankruptcy attorney is the best possible solution to your problems.