In today’s economy, many people are struggling to make ends meet. This is especially true for those who have lost their jobs. Luckily, U.S. law gives those most affected a financial lifeline if they qualify it. One quick and easy way to get rid of most of your debts is in the form of Chapter 7 bankruptcy. Learn more about this chapter, as well as the advantages and disadvantages of filing for Chapter 7.
Advantages of Chapter 7
Those filing for Chapter 7 bankruptcy can benefit in several ways:
- Quick and effective debt relief: Chapter 7 can be completed in about 3 to 6 months, which is much faster than Chapter 13.
- Clean slate: Chapter 7 bankruptcy helps those facing mounting debt and bills restart their life. While not a perfect option, it can give those facing job losses and financial distress a clean financial slate.
- No repayment of debts: Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy” or “straight bankruptcy.” Essentially, in this process, one’s assets are sold off to pay creditors, but at the end of the process, debts are discharged and debtors are relieved of any further obligation to pay.
- Discharges most debts: Chapter 7 allows you to discharge most of your unsecured debts, such as credit card debt, medical bills, and other unsecured debts.
- Stop creditor actions and debt collection: Filing for Chapter 7 can put an immediate stop to debt collector calls and stop court proceedings like foreclosures.
Disadvantages of Chapter 7
Before going down the Chapter 7 road though, it is important to understand some of the drawbacks.
- Lower credit score: Those who choose this path will lose some of their property and see their consumer credit score lowered.
- Limited to low-income filers: Not everyone will qualify to file a Chapter 7 bankruptcy, though. To qualify, one must pass a “means test,” and not all debt types qualify for discharge.
- Not all debts discharged: Certain debts cannot be discharged, such as past-due child support, alimony, tax debts, and student loans.
- You may lose property: If you cannot keep up with your mortgage or car payments, you may be forced to surrender these to the trustee in order to pay off your debts.
Bankruptcy courts will charge a filing fee, administrative fee, and a trustee surcharge. Nonetheless, if the filer cannot pay these fees, even if installments are offered, bankruptcy courts have the ability to waive these fees for those with incomes less than 150% of the poverty level.
Interested in Using Bankruptcy to Eliminate Debt?
For those financially struggling during these incredibly trying times, it can be hard to see a light at the end of the tunnel. There is hope. Chapter 7 bankruptcy can be a much-needed financial lifeline. Our experienced attorneys are ready to help you through process, from the filing to all the complicated paperwork.
Schedule your free consultation today for more information.