Chapter 7 Bankruptcy Overview

Chapter 7 Bankruptcy: Advantages and Disadvantages

The advantages include:
  • The elimination of debt eligible for discharge (exceptions include most tax debts, child support payments, alimony and student loans)
  • There is no debt limit
  • Future income will belong to the debtor, except when the debtor receives an inheritance, proceeds from an insurance settlement, or proceeds from a divorce settlement in the 6-month period following the bankruptcy
  • There is no repayment plan
  • The bankruptcy is completed in about three months

The disadvantages include:
  • The trustee may sell the debtors non-exempt property and distribute the proceeds to creditors
  • Not all debts may be discharged
  • A co-signer on your loan or credit card may become solely liable for the debt
  • A bankruptcy stays on your credit report for up to 10 years
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