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The Advantages of Chapter 7 Bankruptcy

If you are going through a financial crisis you may feel like you are running out of options to make it through. Although filing for bankruptcy is often viewed as a last resort, it actually can be a great tool to get you back on track. Here are  a few reasons seeking Chapter 7  bankruptcy protection may be a solid solution to your financial problems.

Although a Chapter 7 bankruptcy (often referred to as a “liquidation”) is the most common form of bankruptcy, it may not be the right financial decision in every circumstance.  Still, it is helpful to recognize the advantages of a Chapter 7 bankruptcy, especially since they might not be present in other alternatives.  Because declaring bankruptcy can be a very painful, emotional process, it is best to do as much research as possible before making the decision, and it’s always advisable to speak to a knowledgeable professional who can go over your personal financial situation and properly advise you as to whether or not bankruptcy is the right path for you to take

It Presents A Quick Solution

Unlike a Chapter 13 bankruptcy (sometimes referred to as a “personal reorganization”) which can take up to five years, the Chapter 7 bankruptcy usually only takes four to six months.  In a Chapter 7, you don’t have to file a plan of repayment of debts stretched out over a period of years.  Your financial affairs are reviewed and your bankruptcy “estate” is administered by  court-appointed Trustee within the first few months of filing; the process is relatively simple to complete.  Most likely, you’ll only have to make one  appearance, and that will be in front of the Chapter 7  Trustee assigned to your case instead of a bankruptcy court judge. If you want to get out from under debt as soon as possible, and if you qualify, Chapter 7 will probably be your fastest bet.


It Provides A Fresh Start

A Chapter 7 bankruptcy will discharge most of your “unsecured” debts (those for which you have not pledged collateral) completely, giving you a clean slate to move forward financially. In fact, by properly applying the exemptions allowed in bankruptcy, you should be able to keep most, if not all, of your assets and eliminate most, if not all, of your unsecured debt.   There is no minimum or maximum limits for  debt imposed in order to file a Chapter 7, and depending on how urgent your financial problems are, it can provide enormous relief.  While filing for bankruptcy will have an immediate negative impact on your credit score, there are affirmative steps you can take immediately after receiving your discharge to start rebuilding your credit profile.  Filing often makes a dire financial circumstance more manageable short-term.

It Protects You From Creditors

One of the biggest advantages of a Chapter 7 bankruptcy lies in the “automatic stay,” a court-ordered mechanism similar to a state court injunction that provides the debtor immediate relief from creditors by preventing them from taking any action to collect a debt which arose prior to your filing bankruptcy. If you are experiencing harassment on account of your debts, filing a Chapter 7 will put an immediate stop to creditor actions such as lawsuits, wage garnishments, and those unpleasant interactions or phone calls with creditors or their collection agencies

It Can Eliminate Debts While Shielding Assets From Creditors

When you file bankruptcy, it’s your obligation to list all of your debts, as well as all of your assets.  The reason is that bankruptcy was enacted to give the honest debtor a chance at a “fresh start” while providing creditors a forum in which to be repaid from assets that cannot be protected in bankruptcy.  Remember that a Chapter 7 is often referred to as “liquidation,” because your non-exempt assets are liquidated to distribute among your creditors. After you file a Chapter 7 petition, the court will appoint a Trustee to examine property that is may be non-exempt, determining what can be sold to satisfy your debts.  If you have assets and are unsure if they will be at risk in a bankruptcy, it is vital that you consult an attorney experienced in bankuptcy that can properly advise you and apply either the Federal or state specific exemptions to your maximum benefit so that you are able to emerge from bankruptcy with the assets you had when you went in, including equity in your home, your vehicles, retirement accounts and family and household items.


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