The Pros and Cons of Chapter 7 Bankruptcy – Part 2

Pros and Cons of Chapter 7 Bankruptcy

chapter 7 bankruptcy

Many Americans never fully recovered from the economic recession that gripped our country. Some lost their homes through foreclosure while others are still searching for employment. Many had to make the choice whether to put food on the table or pay bills – – of course, feeding their family took first priority. Therefore, millions of Americans are now dealing with aggressive and abusive collection agencies and suffering from the fear, anxiety and stress caused by the inability to pay their bills.

If you are dealing with financial problems, filing a Chapter 7 bankruptcy case can relief the stress and anxiety that you are under. Bankruptcy is a solution that offers freedom from debt collectors and gives you the fresh start that you need in order to recover and rebuild your finances. However, filing a Chapter 7 bankruptcy has both advantages and disadvantages. Below we discuss several of the most common pros and cons of filing a Chapter 7 bankruptcy case.

Advantages of filing a Chapter 7 Bankruptcy case

Emotional relief – This is probably one of the most noticeable and immediate advantages of filing a bankruptcy case. Most debtors report once they make the decision to file a bankruptcy case, they feel a sense of relief because they know they are taking a positive step toward resolving their financial problems and taking control over their finances.

Relief from creditor harassment – Creditors and debt collectors are prohibited from contacting you once your bankruptcy case has been filed. The automatic stay provisions of the U. S. Bankruptcy Code stops creditors from contacting you to collect a debt once they have received notice that a bankruptcy case has been filed. This means and end to threatening letters, harassing telephone calls and collection actions.

A new beginning – A Chapter 7 Bankruptcy case will discharge most types of unsecured debts to allow you the fresh start you need to begin rebuilding your finances. Once your bankruptcy case is complete, your bankruptcy discharge relieves you of the legal responsibility for the repayment of any debt that was discharged in the Chapter 7 bankruptcy case. This means that those creditors are forever barred from attempting to collect those debts and you are no longer legally liable for the repayment of the discharged debts.

Financial management courses – As part of your Chapter 7 Bankruptcy, you will be required to attend, in person, by telephone or online, required credit counseling and financial management courses. These two courses will give you the tools and skills that you need to prepare budges, use credit wisely and manage your money better. These courses are very inexpensive compared to the amount of information each offers. You also have the opportunity to ask questions and get advice from credit counselors during each course.

Disadvantages of filing a Chapter 7 case

Credit rating – You may be concerned how filing a Chapter 7 bankruptcy case will affect your credit rating. A Chapter 7 bankruptcy will remain on your credit history for 10 years and it may cause a temporary drop in your credit score; however, your credit score has probably already been damaged due to your financial problems. Filing a Chapter 7 bankruptcy will help you improve your credit score much quicker than ignoring the collection accounts. Some debtors see an improvement in their credit score after only one year.

Attorney’s fees – It is advisable that you retain an experienced bankruptcy attorney prior to filing a bankruptcy case. While you will incur attorney’s fees and a filing fee to file your bankruptcy case, the fact that you will be discharging thousands of dollars in debt far exceeds the cost of filing the bankruptcy case. Furthermore, it will cost much more to retain an attorney to try to save your home should a creditor obtain a judgment and attempt to foreclose on your home to collect the judgment.

Losing property – Most people worry about this disadvantage more than any other. However, most Chapter 7 cases are considered “no asset” cases meaning that the debtor does not lose any property through the bankruptcy. Debtors are permitted to exempt certain property from the bankruptcy and an experienced bankruptcy attorney can typically help the debtor protect most, if not all, of his assets.

The advantages and disadvantages of filing bankruptcy will vary according to the individual case. However, the advantages of filing a Chapter 7 bankruptcy case often outweigh the disadvantages. If you are suffering from financial problems, consult a bankruptcy attorney to find out if a Chapter 7 bankruptcy case is the best solution to your debt problems.