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What are some positives to filing for Chapter 7 bankruptcy?

Deciding to file for bankruptcy may be one of the biggest financial decisions a person in Tennessee makes in his or her lifetime. Therefore, it is important to be fully aware of how each type of bankruptcy filing works. This post will focus on Chapter 7 bankruptcy. What are some advantages to filing for Chapter 7 bankruptcy?

First, although some property may be lost through the Chapter 7 liquidation process, there are many exemptions that allow a person to keep important assets. In addition, debtors get to keep all the income they make and property purchased after filing for bankruptcy.

Also, while it is true that filing for bankruptcy can negatively affect a person's credit for a number of years, the Chapter 7 bankruptcy process is relatively quick, lasting only between three to six months from start to finish. Moreover, not filing for bankruptcy and instead letting debts go to collections, having property repossessed and possibly being sued, could all be worse for an individual financially than a temporary ding to one's credit report.

In addition, although a person who chooses to go through with a Chapter 7 bankruptcy filing will lose their credit cards, their financial difficulties may have been partly caused by those credit cards to begin with, so not having them may actually work in the debtor's favor in the long-run. And, after a few years have passed, a person may be able to obtain a new credit card.

Keep in mind, some financial obligations, like child support, alimony and student loan debt generally cannot be discharged through bankruptcy. However, a Chapter 7 bankruptcy filing can put a halt to aggressive collection actions and can free up other income to address these obligations.

These are only some advantages to filing for Chapter 7 bankruptcy. Debtors who look to fully inform themselves about this option may find more. In the end, Chapter 7 bankruptcy is just one choice for those who are seeking help with overwhelming debt. While it may benefit some, there are other debt relief options out there. Therefore, debtors should make sure they understand what Chapter 7 can and cannot do for them before making a decision.

Source: FindLaw, "Pros and Cons of Declaring Bankruptcy under Chapter 7," Accessed Oct. 30, 2016

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Kenneth C. Rannick, P.C.
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