Are you struggling with overwhelming debt? Perhaps you are also considering filing for bankruptcy? You may wonder if Chapter 7 bankruptcy is the right choice. Chapter 7 bankruptcy is a lawful process that permits individuals to discharge most of their unsecured debt, like medical bills and credit card debt, and start fresh.
However, it’s not the right solution for everyone. Like any other legal or financial decision, the process has a lot to consider. This article highlights everything you should know about Chapter 7 bankruptcy to help you make an informed decision.
It’s excellent for debt discharge
Chapter 7 bankruptcy can discharge most unsecured debts, including credit card balances, medical bills, personal loans and payday loans. This means you’ll no longer be responsible for paying these debts back, and your creditors will be prohibited from trying to collect them from you.
Unlike Chapter 13 bankruptcy, which requires an individual to repay some or all of debts over three to five years, Chapter 7 bankruptcy doesn’t involve a repayment plan.
It offers you a fresh start
The Chapter 7 bankruptcy policy can provide you with a fresh start financially. However, you should know that bankruptcy can damage your credit score and remain on your credit record for up to 10 years – although most people sufficiently recover from the damaged credit in just one or two years.
Once your debt is discharged, you can start rebuilding your credit and finances without overwhelming debt – and the odds are good that will lead to faster credit recovery than your current situation.
It may involve asset liquidation
The Chapter 7 bankruptcy policy may not be your best choice if you own many valuable assets. This is because it involves liquidating your non-exempt assets to pay back your creditors. Non-exempt assets can include property, vehicles and valuable personal belongings.
Furthermore, not every person is eligible for Chapter 7 bankruptcy. You’ll need to pass a means test to determine if your income is low enough to qualify. If you have too high income, you may be titled to file for Chapter 13 bankruptcy instead.
Chapter 7 bankruptcy can be a powerful tool for individuals struggling with overwhelming debt. If you are considering bankruptcy, you are better off carefully weighing the pros and cons to determine the best action for your financial situation.