The Benefits and Drawbacks of Filing for Chapter 7 Bankruptcy

 Posted on August 29, 2023 in Bankruptcy

While Chapter 13 bankruptcy is an opportunity that is made widely available to most American adults who are struggling with debt, the option of filing for Chapter 7 bankruptcy is reserved for far fewer potential filers. Because qualifying unsecured debts can be discharged via a Chapter 7 filing without a requirement to pay back one’s creditors, the government reserves this opportunity for low-wage earners. If a debt-laden individual meets the means test eligibility criteria for Chapter 7 bankruptcy, they may find that this debt relief option has the potential to free them from significant financial burdens.

Primary Benefits 

Once a Chapter 7 filing is received by the courts, an automatic stay is put into effect immediately. As a result of this legal protection, most creditors are prohibited from demanding repayment or pursuing debt-related legal action while a filer’s case remains unresolved.

After a Chapter 7 case has been navigated successfully, a filer’s eligible unsecured debt is discharged by the court. This means that a filer’s credit card balances, medical bills, personal loans, and other qualifying accounts will never again be that filer’s responsibility to repay.

Primary Drawbacks

Chapter 7 bankruptcy is usually not the best option for someone who owns significant non-exempt assets that they want to keep. While the vast majority of filers do not lose any property after filing for Chapter 7 relief, the trustee assigned to a Chapter 7 case is empowered to sell a filer’s non-exempt assets to repay creditors.

Additionally, Chapter 7 bankruptcy is only helpful on a very temporary basis in terms of foreclosure. Chapter 13 filers have years to work out repayment and/or refinancing of overdue mortgage payments. The automatic stay only lasts for a few months in a Chapter 7 case and does not provide homeowners with much time to save their homes.

Contact a Knowledgeable Kane County, IL Bankruptcy Lawyer Today to Learn More

If you are struggling with unsecured debt and you qualify for debt relief under Chapter 7 of the Bankruptcy Code, taking advantage of this opportunity can help you to achieve a fresh financial start. With that said, it is important to consider the ins and outs of your unique situation – and your options more broadly – before committing to any particular debt relief approach. By connecting with a reputable Kane County, IL bankruptcy lawyer at [[title]], you can benefit from personalized guidance that will empower you to make informed decisions.

To get started, you can schedule a confidential, risk-free case evaluation by submitting a contact form on the firm’s website or by calling 847-426-7990. While filing for bankruptcy is not the best solution to every debt-related concern, it can be life-altering in the best ways under many circumstances. As a result, it may be an option truly worthy of your consideration.

Source:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics