If you are considering filing for Chapter 7 bankruptcy then you should carefully go through its negative and positive aspects. Knowing the benefits and pitfalls of Chapter 7 bankruptcy will help you to take the right decision about filing for it. Chapter 7 bankruptcy has any advantages and it really works good for those who have heavy burden of debts and cannot pay off their debts. However, the pitfalls of Chapter 7 bankruptcy far outweigh its benefits. This is the pint where you have to think again whether filing for Chapter 7 bankruptcy is good for you or not. In this situation you can think about filing for other types of bankruptcy.

Advantages of Chapter 7 Bankruptcy

If you are having heaps of debts and you are financially unstable to pay off all those debts then Chapter 7 bankruptcy is the right option for you. You can file for it and can take a fresh start with your finances. All your debts that are eligible will be eliminated and you will no longer be obligated to pay off debts to creditors. Chapter 7 bankruptcy also has the advantage that there is no limit on the amount of debts that can be cleared by it. However, you should bear in mind that not all types of debts are eligible for chapter 7 bankruptcy. Another advantage of Chapter 7 bankruptcy is that the entire process of filing for it takes only 6 months (maximum in most cases).

Pitfalls of Chapter 7 Bankruptcy

Chapter 7 bankruptcy has many pitfalls that devalue the advantages it gives to the consumer. Consumer has to lose any of their important assets if they have any. The court may force you to sell your car or home when you file for chapter 7 bankruptcy. If there are any current debts then the monies that you have gained will be merged in those debts. To file for chapter 7 bankruptcy, you have to prove your eligibility for it. If you don’t qualify for it you cannot file for it. Read the full story

There are quite a few bankruptcy options available. You could choose one that suits your need. The important thing is to have a thorough understanding of each option so you can pick one that will work best for you.

Chapter 7 bankruptcy option:

Chapter 7 bankruptcy option is usually the last one pursued by consumers. It wipes clean all the debt but also takes away all the assets with the secured debt. However the good thing is that when you have filed for Chapter 7 bankruptcy, the creditors will have to stay away and they cannot ask for any payments. The bill collectors are unable to take any sort of action against the consumer. Yet some of your possessions may have to be sold off to clear off the existing debt.

Chapter 7 bankruptcy option is not available in every state. Also, not every person is allowed to file for this option. First you have to undergo a means test. It is an income based test. It will determine whether your income is feasible enough to file for any other bankruptcy options. Still if your income does not cover the payments over a period of five years, then you can go ahead and file for Chapter 7 bankruptcy.

Chapter 9 bankruptcy option:

The Chapter 9 bankruptcy option is rarely used by the average consumers. It is used in the cases where huge debts have been run up but there are no necessary assets to sell and pay off the debt. Municipalities make use of this bankruptcy option. Some common users of this option are businesses based on agriculture and professional fishing companies. Read the full story