What is Chapter 7 Bankruptcy?Chapter 7 Bankruptcy is considered as “straight bankruptcy.” Unlike Chapter 13 bankruptcy where it involves a repayment plan, Chapter 7 Bankruptcy can eliminate most of your unsecured and secured debts by surrendering all of your assets. The Bankruptcy Trustee gathers all of your support and sells them to pay off holders of claims – your creditors.
Pros of Chapter 7 BankruptcyAutomatic Stay In this type of bankruptcy petition, the court issues an “automatic stay” that takes effect immediately. The automatic stay means an immediate halt to all kinds of debt collection, including calls, letters, lawsuits, repossessions, evictions, and foreclosures. Discharged of Debts As mentioned above, Chapter 7 Bankruptcy can discharge your debts both secured and unsecured. Suppose your petition for this type of bankruptcy is successful. In that case, Chapter 7 Bankruptcy will ban your creditors from collecting debt claims to you. Retain your Assets Once your Chapter 7 Bankruptcy petition becomes successful, your assets and other investments retain. It does not only wipe off your debts but also keeps your assets and investments safe. Protect your Future Wages One of the perks of filing for Chapter 7 Bankruptcy is the luxury of giving you a fresh start. Creditors cannot take hold of your future wages. Whatever future wages or income you may gain, it will be all by yourself. Quick Turnover Unlike Chapter 13, Bankruptcy, where the legal process can take months and years to be over finally, Chapter 7 Bankruptcy legal process is quicker to complete.
Cons of Chapter 7 BankruptcyLiquidation You may need to turn over certain types of properties and assets to the bankruptcy court to pay off your creditors. Likewise, there are specific properties and assets also that are exempted from liquidation. Hiring a skilled attorney will help you identify which investments and acquisitions are included in the exemption. Priority Debts cannot be Discharged Priority debts such as student loans, government taxes and penalties, child support, and alimony are not included in Chapter 7 Bankruptcy for clearing. You still need to pay these types of debts under any circumstances. Affects your Credit Score Filing for Chapter 7 Bankruptcy will significantly affect your credit score. It will stay on your record for a maximum of 10 years. But, you can still rebuild your credit score right after filing a Chapter 7 Bankruptcy. Limits you to file another Bankruptcy Petition Chapter 7 Bankruptcy does not allow you to file another bankruptcy in the future within eight years from the approval of your petition. That is why deciding to file for Chapter 7 Bankruptcy is crucial. It would help if you had an expert’s opinion on whether to file it now or make it a later option.
Is Chapter 7 Bankruptcy Right for You?Chapter 7 Bankruptcy makes sense when:
- You don’t have
- Your total debts are 50% more than your annual income.
- Your unsecured debts that are taking a toll on your life will be discharged. It includes medical bills, credit cards, and other personal loans.
- If your debts take three years or more to pay them off, given you have already done all extreme measures to settle your debts.