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What to consider when filing Chapter 7 bankruptcy

The two most common types of bankruptcy filing are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Both chapters have their benefits but deciding which one is right depends on the unique circumstances of the individual filing. Tennessee consumers considering filing for bankruptcy might find the following article on Chapter 7 bankruptcy helpful.

Chapter 7 bankruptcy is probably the most common type of bankruptcy filing in the United States. Unlike Chapter 13, Chapter 7 bankruptcy allows consumers to erase the majority of their personal debt in one fell swoop with few exceptions. For many consumers this is the biggest appeal of bankruptcy, finally being free them from the bondage of creditors.

Another benefit is that Chapter 7 bankruptcy is fast compared to other forms of bankruptcy. The entire process, from filing to relief, can take as little as three to six months. The hardest part is simply deciding to file. This quick resolution is also appealing to a lot of consumers because it allows them to move on, and often ends the harassing phone calls.

While Chapter 7 bankruptcy is quick and easy, and allows consumers to eliminate the majority of their debt, one problem is that consumers are required to liquidate certain assets to pay back some of what they owe. This can include bank accounts, vehicles and real property. Understanding what assets are protected can be an important factor.

Another downfall is that some big-ticket items like student loans are exempt under Chapter 7. For many people, student loans make up a big chunk of their debt. It is important to take this into consideration when deciding to file. Even with student loans, however, bankruptcy can help free up other money making it easier to manage these payments.

Source: Reuters, "Is Chapter 7 Bankruptcy Right for You?" Andrew Lu, July 27, 2012

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Mark T. Young & Associates
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