Chapter 7 bankruptcy, also known as total discharge, is a law that allows individuals to petition the court to request debt forgiveness. Individuals have this right under the United States Constitution. It provides for a fresh start. The foundational benefits of it are simple. The goal is to enable you to get rid of the debt that is holding you back and to provide a fresh opportunity to rebuild your financial future. As such, there are various stipulations and limitations on filing. This is to both reduce the risks and to protect various functions of the government.
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It's Not an Easy Process
Some people believe Chapter 7 bankruptcy is easy. After all, it may seem like all you need to do is to charge a great deal to credit cards and you can get out of that debt. That is not the way it works. Rather, there are various limitations on the process. Individuals must meet specific requirements in order to file.
-To file, you must make at or under the median average income in your state or you will not qualify.
-You can only file one time every eight years - though some states may vary on this.
-You must relinquish any assets that are not protected under the specific code allotments under your state's provisions or qualify under federal guidelines.
-You must work through consumer credit counseling.
-You must pay a filing fee as well as for attorney fees.
-You must attend a financial education program approved by the state.
Many of these factors can help you to not only get through the current financial distress you are in but also help you to rebuild your future. The goal is not to just provide forgiveness of the debt, but rather to provide an opportunity for financial success.
What Are the Benefits?
When looking long-term, consider the benefits that going bankrupt can offer. Though it does put a strain on your credit score for as long as 10 years, it reduces the overall debt load you carry. In the long-term, that can be beneficial. For example, if you cannot repay your debt over the next three to five years, filing could provide you with an opportunity to get out of debt faster. Many people who do file find that their credit score is improved within two to five years from what it was just prior to filing.
Chapter 7 bankruptcy does have negative effects on a person's credit in the short-term, but if you look into the future, it can be a better option. Consider if you qualify to file and, if so, talk to an attorney about your options. You may find this is the right decision for your future.
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