The Advantages and Disadvantages of Chapter 7

A couple of weeks ago, I focused on some of the aspects unique to a Chapter 13 bankruptcy case, but this week I will focus on issues that relate more to a Chapter 7 process. Chapter 7 bankruptcy has its advantages and disadvantages in comparison to Chapter 13, with the primary benefit of Chapter 7 being the elimination of most or all of your unsecured debt. Unlike the repayment plan required by a Chapter 13 bankruptcy, the debtor is no longer responsible for repaying his or her debt after its discharge in Chapter 7.

In essence, Chapter 7 bankruptcy involves the liquidation of assets for debtors who are struggling to pay for basic expenses every month, whereas Chapter 13 adjusts debts for individuals with a regular income. Unlike the maximums involved in filing Chapter 13, there are no limits on the amount of debt a filer can have in order to file Chapter 7. A debtor filing Chapter 7 can also expect to receive a discharge in a matter of months as opposed to the three to five years it can take to resolve a Chapter 13 case.

However, one of the big disadvantages of Chapter 7 is that your non-exempt property and assets, such as your home or car, might be at risk of being surrendered to the trustee and liquidated to pay off the creditors. If you are facing foreclosure, your lender’s efforts will only be temporarily stalled by filing. If you are behind on mortgage or automobile payments, or the payments are too expensive, you will risk losing those assets.

A knowledgeable Washington DC or Maryland bankruptcy attorney can evaluate your particular situation and determine whether a Chapter 13 or Chapter 7 plan better suits your needs. Tomorrow I will discuss the role that the bankruptcy means test plays in filing Chapter 7.

Law Firm of Kevin D. Judd – Maryland bankruptcy lawyer

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