Pros And Cons Of Filing Chapter 7 - Article by Kent Pinkerton


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Pros And Cons Of Filing Chapter 7	Popularity: Views: 71

2006-11-20 01:05:19
	Article by Kent Pinkerton

Chapter 7 is the most common type of bankruptcy in the United States. When an individual or an unsuccessful business is deeply in debt and not capable of servicing that debt or can't pay back its creditors, it may file or be forced by its creditors to file for bankruptcy in a federal court under Chapter 7. This refers to liquidation. A Chapter 7 filing means that the business intends to sell all its assets, distribute the earnings to its creditors, and then close down operations. One of the major purposes of Bankruptcy Law is to give a person or business, who is completely burdened with debt a fresh start by wiping out debts. Filing for bankruptcy under Chapter 7 has a number of pros and cons. As such, adequate care should be taken before filing. Claiming for bankruptcy under Chapter 7 has a number of advantages. There is no limit on the amount of debt that a person can erase. After distribution of assets, the balance amount due is duly discharged. Creditors or bankruptcy courts do not have a claim on the wages earned or assets acquired by a person after claiming for Chapter 7 bankruptcy. There is no minimum amount of debt that needs to be acquired. Filing for Chapter 7 enables a person to get out of a debt faster as the procedings are often over in about 3 to 6 months. Disadvantages or cons of filing Chapter 7 are varied. People may lose their non-exempt property that can be sold by the trustees. Some debts tend to survive and can be claimed after the case has been closed. In the event of foreclosure on the residence of the applicant, lenders efforts are only held up provisionally by filing for Chapter 7. Co-signers of a loan can be trapped with the debt unless they file for a similar safeguard. Chapter 7 bankruptcy can be filed only once every six years. Apart from this, filing for chapter 7 bankruptcy damages a persons credit rating. This makes it difficult for him to obtain credit in the future. It is difficult to withdraw from a Chapter 7 filing, as such a person should only avail of this protection as a last resort.
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