THE PROS & CONS OF MAKING YOURSELF BANKRUPT - CHAPTER 7

2. Although chapter 7 proceedings sound punitive, most states allow debtors to keep those things are considered necessary for their work. As a result, if structured correctly, a debtor can gain exemptions from chapter 7 proceedings for a large amount of their assets – thereby making the process all the more convenient and less painful!

3. “Because I’m young”. Although chapter 7 bankruptcy proceedings do stay on your records for some time, this really only becomes and issue if you are middle-aged. The reason for this? Because, in this day and age credit agencies specialize in lending to those with bad credit records – so it’ll not be too long before you can get hold of more credit cards and consumer loans, albeit at higher rates of interest. In the meantime, having gone through chapter 7 means that your creditors no longer have a hold on any future payments that you receive – in the same way they would if you undergo either chapter 13 bankruptcy, or a debt management program.

4. Provided you don’t owe money on a type of debt that would survive bankruptcy proceedings, there’s no quicker way to put an automatic stay on payments to creditors who you cannot pay!

5. And finally, chapter 7 bankruptcy proceedings have no threshold requirement when submitting a filing – unlike other types of debt relief, which may well have such a threshold requirement.

Cons

1. The #1 flipside to chapter 7 bankruptcy proceedings is that, unless you can exempt them as being necessary for your work, you’ll lose all of the assets you have worked so hard for during your life to acquire. While this may not be such a problem if you are young, if you are middle-aged with young children, this becomes a serious issue.

2. Closely following #1 is the fact that you’ll have ruined your credit history for the foreseeable future. Now, this doesn’t mean that you won’t be able to obtain credit, you will; but, in order to get this credit you’ll need to be paying high fees and interest rates. Also, the sums lent will, normally, be dramatically less than you were previously getting, so you may not be able to borrow money to buy things such as a car or house for a while.

3. Once done – that’s it. One of the problems of chapter 7 bankruptcy proceedings is that once you have undergone a chapter 7 bankruptcy, you cannot use this method of debt relief again for at least another 6 years. As a result, if within those 6 years you need to seek debt relief again, the option of a chapter 7 filing is out.

4. Even though you file for chapter 7 bankruptcy proceedings, there is nothing stopping the courts from converting your chapter 7 case into a chapter 13 case if the court either thinks you have enough disposal income to repay your debt under a debt management program, or your creditor can evidence this. As a result, you are not really driving the proceedings, others are!

5. And saving the best for last, even though you have undergone chapter 7 – liquidation – proceedings, some types of debt you have created won’t simply go away. For example, if you have mortgage lien, expect to still have the obligation to repay on this even after your chapter 7 process has come to a conclusion.

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