Top 10 Benefits of Chapter 7 Bankruptcy
- End those phone calls. Creditors call at almost all times of the day and night and the weekend as well. When you’re struggling and have plenty of bills, that means you will be getting plenty of phone calls asking about your payment. The automatic stay in bankruptcy law makes it illegal for creditors to continue those calls or any other form of harassment the moment you file for bankruptcy.
- Keep your house and car. A myth of Chapter 7 bankruptcy is that you will lose your most valuable possessions. As long as you don’t have too much equity in your home – and if you had a lot of equity you likely wouldn’t be filing bankruptcy – and foreclosure proceedings have not been initiated, you keep the house. As for your car, there are exemptions that provide protection, depending on the value of the vehicle.
- Protect most of your household possessions. The state and federal exemptions that block what a bankruptcy trustee can seize typically cover all household goods and tools of a trade. Even if you have valuable jewelry or electronics, they often are not seized because of their age and condition. In fact, in 90 percent of all Chapter 7 cases, no property at all is seized.
- Wipe away unsecured debt. The amount you owe on credit cards or any debt that isn’t backed up by collateral can be completely liquidated if you qualify for Chapter 7 bankruptcy. The only payment an unsecured creditor receives in a Chapter 7 bankruptcy is a portion of the value of any seized property. But in most cases, there is no seized property.
- Help with secured debt. With no more secured debt, paying the monthly mortgage and car note becomes much easier again. For many debtors, spiraling unsecured debt eventually makes it impossible to pay all creditors every month.
- Two ways to qualify. There is an income limit with Chapter 7. But if you earn more than the median salary in your state, you can still qualify for Chapter 7 bankruptcy through a Means Test. That’s a process to determine if you have any leftover income at the end of the month to pay unsecured creditors. Notwithstanding our salary, if there is little or no money left over at the end of the month, you qualify for Chapter 7 bankruptcy.
- You may never see the bankruptcy judge. Under the Chapter 7 process, there is one mandatory appearance before the bankruptcy trustee during the creditor’s meeting. While it’s possible questions from the trustee or creditors could lead to a hearing before in bankruptcy court, the overwhelming majority of cases do not involve court appearances.
- Take a deep breath. While you wait to find out if you qualify for Chapter 7, you have the opportunity to relax a little from the financial pressures. The automatic stay stops any harassing calls and you do not have to pay your unsecured creditors while in bankruptcy.
- Fast and easy. If there are no complications, a Chapter 7 bankruptcy case can be over in as little as 4 to 6 months. In Chapter 13 bankruptcy, most debtors are under bankruptcy court supervision for 5 years.
- Start over more quickly. The fact that Chapter 7 doesn’t require a length repayment plan like Chapter 13 means you can begin changing your financial habits and re-establishing your credit much more quickly with Chapter 13.