Chapter 7 bankruptcy is one of the easiest and quickest types of personal bankruptcy. Also known as a “straight bankruptcy”, Chapter 7 absolves most of your debt by liquidating some of your personal assets. However, you will not lose everything. There are some assets that cannot be taken away from you which are called exemptions.

There are several alternatives to a Chapter 7 that you should look in to before deciding to file. Sometimes a Chapter 7 will not take care of the debt that is creating the problem for you when another, like Chapter 13, will. In some states, like Nevada, loan modification can help alleviate some of your debt attached to your home. There are also some things that you can do yourself that may solve some of your problems much like a debt relief company would. If you can take care of your debt without filing for bankruptcy you will only benefit because you will feel more accomplished, learn better spending habits, and most importantly you will not have a bankruptcy tied to your credit report for up to ten years.

There are a few requirements you must meet before you file for a Chapter 7 bankruptcy. This is called a means test, and it will ultimately decide if you able to file for a Chapter 7. In addition to the means test, you should also look at your debts with an attorney to decide whether you would be better off filing a Chapter 13 or other type of bankruptcy. This is important because a Chapter 7 will not take care of debts like taxes, student loans, fines, child support, etc. If you have a lot of unsecured debt such as credit cards, then a Chapter 7 will work out well for you.

One of the major benefits of a Chapter 7 is speed. The average Chapter 7 case is completed in five to seven months, versus three to five years with a Chapter 13, and there are no repayment plans to worry about. This means that you can move on and start rebuilding your life faster. Another thing that people take from any bankruptcy is better spending habits after all is said and done. In many cases people have a better credit rating in the years following their case then they ever did before the bankruptcy.

In reality, a Chapter 7 case does not cost much when you consider how much debt you will be free of when it is all over. In addition to attorney fees, there is a $300 payment due to the bankruptcy courts at the time of filing. As of 2005, you will also be required to attend a credit counseling course before and a financial management course after filing due to the new bankruptcy laws. These are fairly cheap, ranging between $35 and $50 per course. Note that these costs may vary from state to state and attorney fees can also vary greatly depending on who you use.

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Learn more about how to file Chapter 7 bankruptcy

Chapter 7 Bankrutpcy Explained by Randolph Goldberg is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at randolphgoldberg.wordpress.com.