If you are considering bankruptcy, you probably have heard the term chapter 7 thrown around quite a bit. That is because it is the most popular and commonly filed for form of bankruptcy in the United States. It can be used by both individuals and businesses, and while a difficult process to go through, it can help filers get a new financial start in life and regain their footing again. Of course there are some benefits and downfalls to choosing to file through this means.
One of the biggest benefits is the immediate discharge of most debts. Some, such as child support, alimony, student loans, and some back taxes will still remain active and need to be paid. Credit cards, other loans and bills are commonly discharged, allowing a great financial burden to be removed. By filing for Chapter 7, many people feel stress being lifted, as they no longer have to pay huge interest rates on credit cards or be harassed on the phone daily by collectors.
Another benefit to filing this type of bankruptcy is that you can keep your possessions including cars, homes, and other items. In some cases, it may be found that these can be repossessed or the existing debt on them will not be discharged if it is found you can acquire the means to pay. In the average case, foreclosure proceedings as well as repossessions are halted, allowing you to maintain a familiar level of comfort and quality of life.
Bankruptcy isn’t a ticket out of debt, however. There are many downfalls to chapter 7, one of the biggest beings that it remains on your credit report for ten years. That is ten years of struggling to secure loans, get credit cards, and have your credit approved for such things as renting an apartment. It can cause many problems and force you to find alternative solutions. In many cases though, if you are filing for bankruptcy your credit was already rock bottom. Bankruptcy can give you a head start into fixing your financial troubles and rebuilding a decent credit score, although it will take many years.
Just because you feel you are within reason to file for this type of bankruptcy, doesn’t necessarily mean that you are legally entitled to. There are many cases of abuses, which often result in the case being turned into a chapter 13, which is more complex and can involve greater consequences. To determine if you are able to file for chapter 7, talk with a qualified bankruptcy attorney. Otherwise you may be facing possible penalties if the court deems you are better suited as a chapter 13 candidate.
Carefully consider all of your options before filing for bankruptcy as it will have long term and dramatic effects on your finances and overall life. Remember that there are good things that can come from a chapter 7 bankruptcy if you allow yourself to learn and grow from your mistakes and avoid falling into the same financial traps.