Filing Chapter 7 Bankruptcy

Bankruptcy Specialist

When faced with bankruptcy, most people prefer to file a Chapter 7 bankruptcy as opposed to a Chapter 13. There are a variety of reasons for this. First of all, a Chapter 7 bankruptcy is effective; it takes very little time and involves a simple filing process. As well, payments are not required over an extended period of time.

In most cases, a Chapter 7 bankruptcy takes place within a period of three to six months. In this way it is not long and dragged out over months or years. The debtor comes out of the bankruptcy virtually free of debt. There are certain debts however that are not a part of the bankruptcy process and need to be paid. These include mortgages or rent payments, car payments, child support payments, student loans and money owed to the IRS.

While it is possible to lose assets such as property when you file for a Chapter 7 bankruptcy, this is the exception as opposed to the rule. A Chapter 7 bankruptcy allows the debtor to keep most of everything he owns. The less a person has the better off it is for them when it comes to a Chapter 7 bankruptcy. One of the exceptions to this is if you use property of yours as collateral for any loans you have outstanding.

Before more is said about the Chapter 7 bankruptcy it is important to note that not everyone qualifies for a Chapter 7 bankruptcy. Chapter 7 bankruptcies are best for those with few assets and modest to low incomes.

If the court deems that your income is high enough to warrant paying all or a portion of your debts then you may have to forego the Chapter 7 bankruptcy and instead file for a Chapter 13 bankruptcy. The court will subtract the amount of money that you need to spend on living expenses and other bills (such as a mortgage, car loan, child support, income tax, utilities, etc.) from the money you earn and determine whether you make too much to qualify for a Chapter 7 bankruptcy.

The number one reason that a Chapter 7 bankruptcy is most preferable is that debts do not have to be repaid, in full or in part. On the other hand, in a Chapter 13 bankruptcy involves a three to five year plan of repayment. The debtor will not be discharged until the debts have all been paid. In some cases if the individual has sufficient income, the debt must be paid in full. In other cases the arrangement may be worked out that only a portion of the debt need to be repaid.