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Chapter 7 Bankruptcy - The Real Deal

Feb 13, 2008
Chapter 7 bankruptcy is the most common type that is filed for. When someone is considering personal bankruptcy, Chapter 7 is what they are typically thinking of, even though there are multiple types or chapters, each with its own set of guidelines, requirements, and restrictions.

The typical consumer might consider filing bankruptcy when they have a mountain of debt that they cannot ever see themselves getting out from under. This is usually not due to financial mismanagement, but an unexpected change in circumstances, such as a job loss, divorce, high medical bills, and other things that the consumer has no control over.

But keep in mind that such a filing does not come automatically or without sacrifice. As opposed to how easy things were in previous years, the new bankruptcy laws make it significantly more difficult. You cannot, for example, just wake up one morning and decide to file Chapter 7 bankruptcy, and have it done by dinner time.

This mountain of forms and applications needs to be completed, correctly, in detail, but even that does not guarantee you can file bankruptcy. The bankruptcy courts will look at your documentation and finances in great detail before they will approve it. Yes, it needs to be approved, and there is a chance that you will not be able to file bankruptcy if the court does not approve it.

You need to have a good understanding of where all your debts come from. There are some types of debts, such as an IRS lien or student loans that cannot be discharged by filing bankruptcy. If a large percentage of your overall debt is the type of debts that bankruptcy will not discharge, you have little to gain by filing.

Another factor to consider is that a bankruptcy is going to stick out like a sore thumb on your credit reports for the next 7 to 10 years. This can affect your ability to be considered for a new job and open new credit accounts. While you will still be able to get credit, you will need to prove yourself all over again, since you are now considered high risk and the interest rates you will be assessed will be much higher than normal.

Have you thought of how your life will change if you need to liquidate most of your assets? That is what is required with certain chapters of bankruptcy, where your assets are sold off in order to satisfy your debts. Other chapters do not require asset liquidation, but then your debts are not wiped out, but merely reorganized at lower payments and lower interest rates to make is easier for you to meet the obligations.

Especially in light of the recent changes in the bankruptcy laws, you are strongly encouraged to work with a qualified bankruptcy attorney when doing this. They can help with the paperwork, advise you as to what to expect, and also outline other possible options and alternatives you may not have thought of. The money spent on an attorney can more than pay for itself in terms of time spent and potentially assets not liquidated.
About the Author
For more insights and additional information about Chapter 7 Bankruptcy as well as getting a free bankruptcy evaluation from a qualified attorney local to you, please visit our web site at http://www.bankruptcy-data.com
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