Jump to Navigation

In some cases, Chapter 7 bankruptcy is better for debtors

At some point, many consumers who are swimming in debt and have little real chance of ever paying it off begin to think that bankruptcy is their only real solution. They may already know, or soon discover, that several bankruptcy options are available under the federal Bankruptcy Code. At first glance, the differences are not clear, but ultimately many decide that either Chapter 7 or Chapter 13 may be right for them. The question then becomes, which one will leave them better off?

For many, a Chapter 7 bankruptcy ultimately makes better sense because it eliminates most of their debt and can bring a fresh start sooner. The principal drawbacks include an income requirement and the possibility of having to give up some valuable property that is sold to help pay creditors. In addition, some things that an applicant acquires within six months of filing for Chapter 7 -- insurance benefits, death benefits, inherited assets or properties and anything acquired through divorce -- is considered part of the applicant's estate and thus up for disposal to satisfy debts.

Even with these considerations, Chapter 7 may still look better than Chapter 13. It is faster, usually taking only 60 to 90 days from start to finish. No repayment plan is required as with a Chapter 13 court-supervised plan; once the bankruptcy finishes, the applicant is free of the debts covered by Chapter 7. There is no limit on how much debt an applicant can have, unlike Chapter 13's debt limit for secured and unsecured debt. Finally, the applicant gets to keep all income and most of the property the person acquires after the bankruptcy is over.

Not every type of debt can be discharged through Chapter 7. The applicant will still be responsible for student loans, overdue child support and alimony and certain taxes.

Source: U.S. Courts, "Chapter 7," Accessed April 12, 2015

No Comments

Leave a comment
Comment Information
Start Right Now

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close
Visit Our Bankruptcy Law Website Subscribe to This Blog's Feed
Office Locations

1115 Massachusetts Ave NW,
Washington, DC 20005
Phone: 202-559-1428

10512 Pohick Court,
Fairfax Station, VA 22039
Phone: 703-550-7030

6926 Seven Locks Road,
Cabin John, MD 20818
Phone: 301-890-4500

Toll-Free: 877-441-4076
Fax: 202-638-5858

Twitter link