Benefits of Chapter 7 Bankruptcy
In 2016, over 490,000 people filed for Chapter 7 bankruptcy, making up around 62% of all bankruptcies filed that year. There are a number of different types of bankruptcy but Chapter 7 usually has the most benefits for many individuals.
Filing for bankruptcy is often seen as a negative thing but in many cases, filing Chapter 7 is a responsible way to handle debt. Our experienced bankruptcy attorney has helped thousands of individuals since 1988 to file bankruptcy and get a fresh start on life.
Understanding which type of bankruptcy to file comes down to what kinds of debts you have and what you want to gain from filing bankruptcy. For many that means filing a Chapter 7 is the option they’d prefer to take.
Most cases, the alternative is Chapter 13 bankruptcy, which has its own negatives and positives.
Advantages of Chapter 7 Bankruptcy
Chapter 7 is more common and faster than other kinds of bankruptcy. For most people in debt, the benefits outweigh the negatives of using Chapter 7.
We can help you figure out what’s most important to you and which bankruptcy to file in a free twenty minute strategy session.
You’re Debt Free After Chapter 7
Chapter 7 bankruptcy differs from Chapter 13 bankruptcy in many ways—but the most important for many people is that they no longer have to continue to pay after bankruptcy is over. Chapter 7 discharges debts, instead of creating a repayment plan, meaning that those that complete Chapter 7 start with a clean financial slate after it’s over. They also don’t have to keep paying for debts for years.
Chapter 7 is Fast
Once you file Chapter 7, you can be debt-free in as little as 100 days. Instead of repaying for years on debts like the typical Chapter 13 bankruptcy, Chapter 7 goes by quickly. For most people, it’s a process that helps them improve their situation, instead of digging the hole deeper. There’s hope at the end of about 4 months of bankruptcy proceedings.
You don’t have to talk to Creditors
Because debts are discharged completely, you don’t have to deal with your creditors again. During the bankruptcy proceeding, your attorney will often file a Stay that prevents creditors from contacting you throughout the process. Once Chapter 7 is complete, creditors can no longer call on debts that have been discharged.
You can get rid of unlimited debt
Although a Chapter 7 can’t discharge all types of debts, filing a Chapter 7 gets rid of any amount of debt of the kinds that can be discharged. Whether you’re facing debts in the thousands or hundreds of thousands, Chapter 7 can discharge most consumer debt like credit cards, personal loans, medical bills and other types of personal debt.
You may be able to keep your house or car
Can I keep my house or car with Chapter 7? In most cases, yes. Many people think you can’t keep your house or car in Chapter 7 but that’s not quite true. There are a number of exemptions you can take when filing Chapter 7 that can allow you to keep your house or car after bankruptcy is over. Every case is different, however, so consulting with an experienced bankruptcy attorney can help you better understand your situation.
You learn & grow
As part of pre-bankruptcy and pre-discharge, you’re required to take two financial courses to help you make a plan to manage your finances. For many people, they get access to information that helps them better manage their money and stay out of debt in the future.
Disadvantages of Chapter 7 Bankruptcy
Chapter 7 isn’t the right kind of bankruptcy for every case and does comewith disadvantages. Sometimes Chapter 13 is a better choice. Speaking with an attorney can help you identify the disadvantages outweigh the benefits in your situation.
Chapter 7 remains on your credit for 10 years
It’s true that bankruptcy can hurt your credit score. But what’s worse—continuing to not make payments and continuing to ruin your credit for years or starting to rebuild after one big credit event? Instead of digging the hole deeper over time, Chapter 7 bankruptcy allows you to start rebuilding credit.
You lose your credit cards
As part of Chapter 7 you have to give up your credit cards. It doesn’t mean you can’t get credit cards in the future but it does mean you have to stop using them for a period of time. Chapter 7 requires you to change how you deal with your personal finances—but you’re not alone and have access to resources to help you as part of the Chapter 7 filing process.
You may not be able to get mortgage
If you don’t already own a home, filing bankruptcy can make it more difficult to get a mortgage. There are lenders who specifically lend to individuals who have filed bankruptcy in the past so there’s less truth today in this disadvantage to Chapter 7 than in the past.
You unable file again for 8 years
Federal rules permit an individual to receive a discharge in a Chapter 7 bankruptcy once every 8 years. This prohibits you from filing another Chapter 7 bankruptcy case within 8 years of filing the first case.
It’s doesn’t work on all kinds of debt
Not everyone who has debt can use Chapter 7 because it doesn’t work on all kinds of debt. Child support, alimony, and most Federal Income Taxes can’t be discharged with Chapter 7.
Ready to weigh your Bankruptcy Options?
We offer free twenty minute strategy sessions to talk with our experienced bankruptcy law firm staff and figure out what the best option might be for you and your individual situation. If you’re unsure if Chapter 7 is right for you, talking with our experienced bankruptcy lawyer may be able to help put you on the path towards financial recovery.