Chapter 7, or "straight" bankruptcy, effectively discharges all debt from your outstanding accounts by selling any property and nonexempt assets in order to pay off creditors. Although choosing Chapter 7 bankruptcy is often a last resort for most people, hundreds of Modesto residents are filing every month. According to the U.S. Bankruptcy Court's Eastern Division of California office, 265 claims for Chapter 7 bankruptcy were filed in January 2010 in the Modesto area alone.
The Advantages of Chapter 7
Chapter 7 effectively allows you to have a fresh start. Most of your debts can usually be discharged within four to six months under Chapter 7, including credit card debt and other unsecured debts. There is no minimum amount of debt needed to file for Chapter 7 and once your debts are discharged, you are completely cleared of them for the rest of your life. Your wages and possessions purchased after discharge can no longer be garnished or possessed by creditors. Chapter 7 bankruptcy can help relieve the stress of foreclosure, harassing creditor calls and general anxiety over your financial future. Although this isn't a tangible advantage, many Modesto residents find that peace of mind is an invaluable benefit of bankruptcy filing.
The Disadvantages of Chapter 7
All your eligible assets will be liquidated under Chapter 7 bankruptcy, so you may lose your home, vehicle(s), boat, etc. If you had a co-signor for your home, that party may now be responsible for your loans if they don't take action to protect themselves. Additionally, your credit rating will be destroyed. Most loans and credit accounts will not be available to you and the ones that are will likely carry high interest rates, require collateral or secured deposits and have limited lines of credit. You can only file for Chapter 7 once every eight years. Further, some debts cannot be discharged under Chapter 7, and you will still be responsible for paying them. Non-qualified debts include domestic support orders, debt obtained by fraud, most tax debt, student loans and property liens.
Serious financial hurdles can be nearly impossible to surmount without help. A qualified, experienced Modesto bankruptcy lawyer can help you decide whether or not Chapter 7 is right for your situation. Even the tiniest mistakes can delay or even disqualify bankruptcy paperwork, so it pays to have a trusted lawyer on your side.