Advantages and Disadvantages of Chapter 7 Bankruptcy
Chapter 7 bankruptcy
Chapter 7 bankruptcy is a liquidation where the trustee collects all of your assets and sells any assets which are not exempt. The trustee sells the assets and pays you, the debtor, any amount exempted. (source; nevadabankruptcy.com/chapter7.html)
Upsides of Filing Chapter 7 bankruptcy
Individuals are protected from creditors as soon as the bankruptcy case is filed with the bankruptcy court. When you file for bankruptcy, all collection operations are automatically halted. All phone calls, garnishments, and collection letters must cease immediately. Repossessions, evictions, and foreclosures were all put on hold for the time being.
- Major Debt Relief
The main benefit of Chapter 7 bankruptcy is that it allows a person or corporation to discharge all unsecured debts, such as utility, medical, and credit card payments, as well as other personal loans. The best thing is that debt relief has no upper limit, meaning that a bankruptcy can erase hundreds of thousands of dollars in debt.
- Automatic Stay
During the bankruptcy process, a lender cannot seize or foreclose on your property if you file for Chapter 7. Although this is only a temporary solution, it buys you some time to make up for missed payments or find another option
- Protection from Debt Collectors
You are protected from creditors who may have been bothering you for debt collection in the past because of the automatic stay. You have everlasting protection when a debt is totally discharged. On the other hand, you can be eligible for a partial discharge and a period of time to pay off your remaining debt.
- No Wage Garnishment
No creditor can take a percentage of your wages or monthly income once you are protected by bankruptcy law. This money can be used to meet your basic necessities and cover monthly bills.
- Property Exemptions
Chapter 7 allows you to keep assets that are critical for day-to-day survival, including as a family home, a daily commuter automobile, clothing, and furnishings. You can also keep other assets worth less than a certain amount (usually $10,000 or less), allowing you to maintain a decent standard of living.
- Clean Slate within Few Months
Chapter 7 bankruptcy is chosen above other types of bankruptcy because it allows you to get out of debt in as little as 3-6 months. You get immediate debt relief and a fresh start on your financial destiny. Chapter 13 bankruptcy, on the other hand, enrolls you in a five-year debt repayment plan.
Advantages of Chapter 7
Cons of Filing Chapter 7 Bankruptcy?
Filing for bankruptcy under Chapter 7 is not for everyone. Even if it appears to be the best debt relief choice for you, once you consider some of the disadvantages of Chapter 7, it may not be.
Disadvantages of Chapter 7
- Income Limit
If your individual or business income is higher than a specified amount, you shall not qualify for Chapter 7. If you have substantial disposable income, the bankruptcy will be converted into Chapter 13, which means partial or no discharge of debt.
- Bad Credit Score
Your credit score will decrease regardless of which type of bankruptcy you file. Your bankruptcy will appear on your credit report for 7 to 10 years. If you qualify, you won’t be able to get fresh credit or a loan for a period, and you’ll have to pay exorbitant interest rates. If your credit score is already below 600, however, bankruptcy will have little effect. In reality, within a few years, it will assist you in improving your grades.
- Asset Liquidation
The bankruptcy trustee will liquidate non-exempt assets including very expensive automobiles, real estate, and collectibles to pay your creditors.
- Unwanted Publicity
When you declare for bankruptcy, the public has access to the specifics of your financial situation. Although anyone can seek up information about the bankruptcy, few individuals do.
- Non-dischargeable Debts
Secured debts, such as mortgages, school loans, and vehicle loans, are not dismissed in a Chapter 7 bankruptcy. Furthermore, bankruptcy does not relieve you of financial obligations such as child support, alimony, or taxes owed to the government.
Have an Attorney Guide You Through the Chapter 7 Bankruptcy Process
The decision to file for bankruptcy is complicated, and there are benefits and drawbacks to Chapter 7.
If a bankruptcy is necessary, you’ll want to think about whether you can avoid it altogether or how to protect your valued possessions.
Contact a local bankruptcy attorney to learn how the law can assist you in resolving your financial problems.
Freedom Law Firm is here to help.
Bankruptcy is often the last but necessary resort. It is a delicate and complex proceeding, and you want someone with plenty of experience to consult with, guide you through the process and help you determine the scope of the discharge.
In many cases, unless a party in interest files a complaint objecting to the discharge, the bankruptcy court may issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.If you would like to find out whether bankruptcy is the right option for you, please request a call-back by submitting a short online form. All initial consultations are FREE and confidential.