When bankruptcy becomes inevitable, most people prefer filing Chapter 7 if they are eligible for it. A Chapter 7 bankruptcy case is typically opened and closed within three to six months, and the person generally comes out of it debt-free except for car payments, a mortgage, and certain types of debts such as student loans and unpaid child support. In this blog entry, we’ll look at several advantages of filing Chapter 7 bankruptcy rather than Chapter 13.
The debtor can start fresh. Chapter 7 bankruptcy is intend to provide a fresh start to those in financial trouble. The removal of certain debt frees people from personal liability for the discharged debt.
Future income is not included in the bankruptcy estate. The property that a person acquires after filing for Chapter 7 is not eligible for seizure. There are exceptions, such as certain property acquired by the debtor within 180 days after filing (for example, inherited property, death benefits, or a payout from a life insurance policy) but in general, a debtor keeps more than they would if they filed for Chapter 13.
There is no repayment plan. Unlike Chapter 13, the debtor is not required to repay debt under a court-directed three or five year repayment plan.
No debt amount limitations. Under Chapter 13 bankruptcy, a debtor is ineligible if their secured debt exceeds $1,010,650 and unsecured debt exceeds $336,900. There are no such restrictions in place for a Chapter 7 filing.
Debt is discharged quickly. In many cases, debt can be discharged in as little as three months. The court will issue a discharge order and close the case after the trustee distributes debtor property to unsecured creditors.
Although not everyone is eligible to file for Chapter 7, especially if their income level appears to support a repayment plan, those who are can generally start rebuilding their credit and improving their financial health more quickly than if they had filed for Chapter 13. Please contact us today if you’d like to learn more!
Law Office of Ray Garcia, P.A.
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