What are the benefits of filing for Chapter 7 bankruptcy?

Understanding the numerous benefits of filing for Chapter 7 bankruptcy may help people decide if it is the right option for their needs.

Through the first quarter of 2017, the U.S. saw the total household debt in the country rise to a new high of $12.73 trillion, according to a CNN Money report. Unfortunately, as some have taken on new liabilities, job losses, decreases in income and other factors may have contributed to them falling behind. To achieve a fresh financial start, some in Florida and elsewhere who find themselves struggling with debt may consider petitioning for Chapter 7 bankruptcy. Understanding the benefits of this debt relief option may help people decide if it is the right course of action given their circumstances and needs.

Achieving a quick resolution

In comparison to some of the other debt relief options, filing for Chapter 7 bankruptcy may allow people to resolve their financial troubles quickly so they can begin rebuilding. From start to finish, many Chapter 7 cases are resolved within three to six months of people's filings. Chapter 13 bankruptcies, on the other hand, require people to make monthly payments for three or five years before they are finalized.

Immediate stop to collection efforts

When people file a petition for Chapter 7 relief with the court, an automatic stay is issued. This legal action stops all collection actions against filers by their creditors. As such, their creditors cannot make collection calls, garnish any wages, or initiate or continue any lawsuits while these stays remain in effect.

Earnings after filing are not affected

Sometimes referred to as liquidation bankruptcy, Chapter 7 filings may require people to forfeit certain assets to be sold in support of paying back their debts. Additionally, the court may evaluate their income for the six months before their filings. However, once they file their petitions with the court, any future income or earnings are not subject to the bankruptcy or liquidation process. This stands in stark contrast to Chapter 13 bankruptcies, under which people must apply all their disposable income toward the repayment of their debts over the course of their plans.

Relief from certain liabilities

At the end of their cases, people who file for Chapter 7 bankruptcy may be eligible for a debt discharge. This action may relieve them of their liability for certain debts. These may include the following: credit card balances, medical bills, past due utility bills, some civil court judgments, personal loans from private people, certain tax penalties and unpaid taxes, motor vehicle accident claims from collisions not involving intoxication and some revolving charge accounts. Once such debts are discharged under Chapter 7 bankruptcy, creditors are no longer able to pursue collections on them.

Seeking legal guidance

For most Floridians, navigating the ins and outs of filing for Chapter 7 bankruptcy may further complicate an already stressful time. Therefore, it may benefit those who are struggling financially to consult with an attorney. A lawyer may help them determine how to proceed based on their situations and guide them through the legal process.