Chapter 7 Bankruptcy – Pros & Cons

Chapter 7 Bankruptcy – Pros & Cons

Chapter 7 Bankruptcy – Pros & Cons Write-Off Debt and Solve Money Problems by Filing for Bankruptcy An increasing number of consumers with serious money problems are filing for bankruptcy to write-off More »

How much does it cost to file bankruptcy? – Is Bankruptcy the Right Option?

How much does it cost to file bankruptcy? – Is Bankruptcy the Right Option?

Is Bankruptcy the Right Option? Avoiding the Stigma of Bankruptcy with Alternative Debt Solutions   If you asked a group of people to come up with a solution to a serious debt More »

How much does it cost to file bankruptcy? – Basics of filing bankruptcy

How much does it cost to file bankruptcy? – Basics of filing bankruptcy

When you are bankrupt, then every penny is counted. You have lots of debt on you and in between of this, you have to pay money for filing bankruptcy. Well, there is More »

How much does it cost to file bankruptcy? – know about attorney fees

How much does it cost to file bankruptcy? – know about attorney fees

It is hard to determine the filing cost of bankruptcy if you are hiring an attorney. Although attorney option is expensive on the other hand, it is beneficial also. You can say More »

How much does it cost to file bankruptcy? – Some important factors

How much does it cost to file bankruptcy? – Some important factors

Business activities throughout an economy lead to many profits for the one who undertake these activities. However, credit facilities have often resulted in bankruptcy for many in this industry. Undoubtedly, a bankruptcy More »

 

Chapter 7 Bankruptcy – Pros & Cons

Chapter 7 Bankruptcy - Pros & Cons

Chapter 7 Bankruptcy – Pros & Cons

Write-Off Debt and Solve Money Problems by Filing for Bankruptcy

An increasing number of consumers with serious money problems are filing for bankruptcy to write-off debt. It is important to consider the pros and cons of filing for chapter 7 bankruptcy before proceeding with this debt solution. Whilst personal insolvency alleviates financial pressure, it can also have a negative ramification for credit scores.

Advantages of Chapter 7 Bankruptcy

  • Write-off debt. Chapter 7 bankruptcy allows people to write-off debt and resolve money problems. There is no minimum level of debt before this debt solution can be used.
  • Speed. The insolvency process only takes in the region of 3 to 6 months.
  • Exempt property. Filing for bankruptcy doesn’t cause the loss of personal pensions, household appliances, vehicles (up to a certain value) and the tools of the trade necessary for business.
  • Adverse credit lenders. Whilst borrowing money is more difficult due to having a poor credit score, there are several adverse credit lenders that may be prepared to offer mortgages and credit cards once a few years have subsequently elapsed.
  • Prevents foreclosure. Whilst there is only a provisional hold-up on foreclosure, this provides a homeowner with time to get back on their feet and come up with a viable repayment plan.

Disadvantages of Chapter 7 Bankruptcy

  • Credit score. Filing for bankruptcy will seriously affect personal credit scores for the next 7 to 10 years. Whilst this will improve with each passing years, it will be difficult to borrow money for new credit cards or mortgage refinancing.
  • Non-exempt property. Certain items cannot be excluded, such as a valuable collection, stocks or a second home or car.
  • Means test. Individuals applying for chapter 7 bankruptcy will need to pass a ‘means test’ based on the median income for that state. However, Best Case Solutions produced research showing that 85 per cent of individuals opting for chapter 7 have an income below the median level.
  • Limitations. Filing for bankruptcy is only permitted once in every six years.
  • Certain loans. It is not possible to write-off debt from car or student loans, although it can prevent aggressive collection activity from lenders.
  • Alimony, child support and taxes. Insolvency doesn’t protect someone from money problems caused by alimony, child support or unpaid taxes.
  • Mortgage lien. Chapter 7 bankruptcy doesn’t remove a mortgage lien.
  • Co-signers. Individuals that have co-signed for a low will not enjoy the same protection as those filing for bankruptcy unless they also go down the same route.
  • Court decision. A court could decide that an alternative debt solution, such as chapter 13 bankruptcy or a Debt Management Plan is more appropriate. This is likely to happen if the debtor has a reasonable disposable income or assets.

Provided that someone has minimal non-exempt assets and an income below the median level for the state they live in, chapter 7 bankruptcy is a viable option. Whilst filing for bankruptcy does affect someone’s credit score for 7 to 10 years, it is likely that their score is already bad as a result of missed or late payments on existing credit agreements.