Advantages and Disadvantages of Filing Chapter 7 Bankruptcy

Filing Chapter 7 may be an option which will relieve you of your debt and help you get the fresh start you need. There are several important advantages of filing Chapter 7 bankruptcy. In fact, Chapter 7 is the most common form of bankruptcy in the United States. An individual or a business may file under Chapter 7 of the U.S. Bankruptcy Code. This process involves the liquidation of assets and the distribution of proceeds from this liquidation to creditors. Following are some of the advantages of Chapter 7:

• Stops creditor harassment.
• Stops all debt collection efforts.
• May stay foreclosure proceedings, giving you time to figure out an alternative to foreclosure.
• Successfully completed, discharges all eligible debt.
• No maximum limit to the amount of debt that can be discharged.
• No minimum amount of debt that can be discharged.
• Chapter 7 proceedings take approximately 3 to 6 months to complete, meaning your debt can be discharged in a relatively short amount of time.

While there are many important advantages to filing Chapter 7, there are also some disadvantages that are helpful to fully understand:

• Your non-exempt property and assets may be at risk of being surrendered to the bankruptcy court and liquidated to pay off creditors.
• Not all debt is eligible to be discharged (including spousal support, child support, and certain student loans and taxes.)
• Chapter 7 bankruptcy can only be filed once every 8 years.
• A Chapter 7 bankruptcy can negatively affect your credit rating and make it difficult to get loans in the immediate future.

Even with the disadvantages associated with Chapter 7 bankruptcy, you can avoid most negative consequences by working with a lawyer and fully preparing for what is to come.