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What Are the Pros and Cons of Filing a Chapter 7 Bankruptcy

What Are the Pros and Cons of Filing a Chapter 7 Bankruptcy
"""Chapter 7 bankruptcy enables the debtor to receive a discharge of debts and a fresh start. Despite the fact that the procedure can often be humiliating, the debtors should not be embarrassed. People file for bankruptcy for a variety of reasons, including job loss, high medical expenses, a decline in the value of their home due to the economy, a lack of adequate educational training, and family problems. All of these reasons, combined with poor luck, can occur to virtually anyone.

Sometimes, simply informing creditors that you are considering filing for chapter 7 bankruptcy, particularly if you retain a bankruptcy attorney, can persuade unreasonable creditors to make more reasonable settlement offers. When settlements cannot be reached, the following are some advantages and disadvantages of filing for Chapter 7.

The advantages of filing Chapter 7 bankruptcy

Chapter 7 requires completion of an approved credit counseling course, the filing of a petition, and attendance at a creditors' meeting. If everything goes according to plan, which means creditors do not submit objections, the entire process takes approximately six (6) months. The debtor will typically be released from the debts listed on the bankruptcy petition six months after filing. There is no wasted time involved in making long-term payments. Rarely do creditors submit objections.

Less costly: The process is less costly than registering for chapter 13 or extensive debt counseling. Administrative costs and attorney fees are the most significant expenses.

The attorney is compensated for reviewing your financial affairs, ensuring that the petition contains all required information, addressing all issues raised by creditors and trustees, attending the creditor's meeting with you, and ensuring that the discharge is granted.

The attorney will also explain your post-bankruptcy options, including measures you can take to restore your credit.

This means that you will no longer owe the creditors any money. You can concentrate on increasing your income and use the money you already have to pay your essential expenses.

Creditors and collection agencies cannot pursue you for these debts, as you will no longer due on them. Debts that have been forgiven are your opportunity for a new start.

You may be able to enter into a reaffirmation agreement if you have a vehicle or other valuable asset that you desperately wish to keep.

This agreement entails that you will retain your automobile (or other asset), but you will continue to make monthly payments and pay any arrears.

Typically, reaffirmation agreements are only used for obligations where the creditor has a security interest in the item and the item (such as a vehicle) is essential to your ability to function or work.

Despite fewer proceedings, Chapter 13 bankruptcies can last between 3 and 5 years. It may also necessitate proceedings other than a meeting of creditors because creditors, particularly those with a secured interest in property, are more likely to play an active role in monitoring or examining your plan to repay your debts.

In addition, Chapter 13 requires you to collaborate with a trustee for three to five years. Chapter 7 bankruptcy typically involves only one hearing, a meeting of creditors. The meeting is typically very brief.

Since your debts are being discharged, creditors typically do not have the right to garnish your wages because you no longer owe the money.

Cons of Chapter 7 Bankruptcy Filing

Filing for bankruptcy can result in credit damage and the loss of some assets. Before filing for Chapter 7 bankruptcy, debtors should investigate debt settlement and debt counselling options to determine if there is any way to avoid filing.

If Chapter 7 is not an option and the debtor wishes to save their residence or vehicle, Chapter 13 should be considered.

These are some of the most important reasons why debtors should avoid Chapter 7 bankruptcy:

Personal shame: the bankruptcy process can be humiliating. The majority of those who file have valid reasons for doing so, but they still perceive a social stigma associated with filing. They fear that family members, acquaintances, neighbors, and coworkers will discover that they have filed, which can make many individuals feel quite uneasy. My general recommendation in this department would be to not fret about it, as it is almost never discovered.

Can't save your home: Most debtors' primary concern is where they will reside. If the debtor owns a home and their exemptions are insufficient to save it, the home must be sold and the debtor must find a new place to reside.

Cannot save your vehicle or other secured property: As with a residence, anyone with a security interest in your automobile, tools, or other assets will attempt to recover their investment.

They accomplish this by repossessing and selling your collateral. If you are unable to enter into a reaffirmation agreement and the value of your vehicle or asset exceeds your exemptions, you will lose the vehicle/asset.

In the end, you must consider the pros and cons of chapter 7, but the ability to start over with your life and finances significantly outweighs the disadvantages.

" - https://www.affordablecebu.com/
 

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"What Are the Pros and Cons of Filing a Chapter 7 Bankruptcy" was written by Mary under the Finance / Wealth category. It has been read 134 times and generated 0 comments. The article was created on and updated on 31 May 2023.
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