The Pros And Cons of Chapter 7 Bankruptcy Claims Revealed

Chapter 7 bankruptcy is a method of bankruptcy in which an individual or business cannot pay off their debts. The Chapter 7 process starts by obtaining a petition from the debtor that includes an inventory of all creditors and the total sum of all claims as well as all financial statements.

A trustee is generally appointed to the individual or business by the court. He/she will have a discussion about the debtor’s claims in an effort to work out an agreement on the amounts owed to each creditor.

The trustee then liquidates the business assets and distributes the money to the creditors that are owed according to the credit claims determined by bankruptcy laws.

Individuals with previous bankruptcy cases that may have been dismissed within the past 180 days will not have access to a chapter 7 claim under particular conditions.  However, you will find that if you do qualify and file a claim, there will be a few benefits available to you.   

After you have successfully filed a Chapter 7 bankruptcy, you will not owe anything to the creditor for the majority of your unsecured debts. You may be allowed to maintain certain exempt property.  Exemptions do vary from state to state, so you should check your state laws.

A Chapter 7 will typically provide you with a faster way of getting out of debt than other bankruptcy claims. It generally takes about 3 to 4 months to compete a Chapter 7, where as a Chapter 13 will take anywhere from 36 to 60 months.  

On the flip side of things, filing a Chapter 7 bankruptcy may not be for everyone.  You have to qualify under a Means Test.  If you do not qualify, you will not be able to file.  In addition, if you have declared alimony or child support, have a student loan debt and or owe current income taxes, you will not qualify.  These types of debts are not exempt under bankruptcy Chapter 7.

A Chapter 7 bankruptcy will remain on your credit report for 10 years from the date you filed. This makes the ability to get credit that would be otherwise available less favorable during that time.

There are many things to consider when filing any type of bankruptcy claim.  It is a good idea to find a qualified bankruptcy lawyer in your state to discuss your options before you file.