The Bad And Good Of Filing Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also called straight bankruptcy, is only one of the ways in which people battling with debt can get debt relief. Anybody can file this kind of bankruptcy, whether single, married, a co. or partnership. Though it has its benefits, Chapter 7 bankruptcy does have its drawbacks. It would be sensible to find out just what it implies to file this kind of bankruptcy before making the plunge. It works quite simply. The assets of a debtor who files for bankruptcy are sold, their creditors are paid and the debtor is free from that debt from the point of settlement. It takes a comparatively brief time, approximately about 6 months from time of filing to settlement. When filing a petition a debtor will have to supply information about how many creditors he owes and how much, his income, any property that he owns and an in-depth list of his monthly expenses. The Good. As quickly as a petition is filed, creditors are not permitted to make any attempts at collection of what they are owed. This gives debtors some sorely-needed room to respire, particularly if they were barely keeping their heads above water. The creditors can ask the judge to have the stay lifted in order that they can collect. However , they would need to prove that swift action is required. In most states, a debtor is allowed to keep those assets that are required for his work. As an example, the tools of his profession or trade may not be touched. His residence and social security or unemployment benefits will also be exempted. If certain creditors do not receive their payments from the profits of the sales of the assets of a debtor, they can not make any future attempts to collect. This automated stay is a nice relief to debtor who has crippling debt. Though there are particular debts that will survive the bankruptcy filing, generally this makes it simpler to start afresh. Filing Chapter 7 bankruptcy takes a short time. The entire process could be through in six months. Other types of debt repayment options last for six years or more. Chapter 7 bankruptcy permits debtors to get back to a comparatively normal life at the earliest opportunity. The Bad. Aside from those assets that are exempted, everything else will be sold to cover the debt. This means years of difficult work may be lost. If a debtor has dependents, this move might be too high-priced. In addition, if you do declare bankruptcy, it will leave a black mark on your credit score. The amount of credit that you can secure will be far less than what you would have gotten before filing for bankruptcy. Further, the IRs will be terribly high. Filing under Chapter 7 is a little bit of a gamble. It’s not carved in stone that your debts will be settled this way. If the courts see fit, they can change it into a Chapter 13 case. This indicates you will get some debt relief though not the particular one you wanted. Lastly, once you have filed for bankruptcy under Chapter 7, you cannot use it for no less than 6 years. Chapter 7 bankruptcy offers some relief to those who are fighting with too much debt. It’s the quickest and most straightforward form of bankruptcy. Nevertheless it isn’t for everyone. Before filing a petition under this chapter, weigh the benefits and drawbacks to determine if it is acceptable for you. Emory Somervale would like to thank the lawyers with the Lusky law firm in Dallas and Plano for their guidance on bankruptcy proceedings that was use in preparing this article.