While some people may dread filing for Chapter 7 bankruptcy and use it as a last resort in trying to clean up their extensive financial obligations, there are several ways that filing for bankruptcy can be beneficial. People who have a bankruptcy on their record will notice a decrease in their credit score, and may find it hard to be approved for home mortgages, car loans and other financial loans. Chapter 7 bankruptcy, however, allows people to climb out from beneath a pile of financial debt, and gain their footing when it comes to beginning a new future free from debt.
When people file for Chapter 7 bankruptcy, they are already in a state of financial turmoil. Rather than keep adding to the debt, bankruptcy offers a way to put a stop to the damage. Debtors can refrain from wreaking further havoc on their credit scores, and instead, begin to rebuild their credit in a positive fashion.
Chapter 7 bankruptcy is referred to as liquidation bankruptcy, as many of the debtors’ possessions may be reclaimed and distributed to creditors. However, debtors are allowed to keep certain property and can often keep their mortgage free from repossession. In addition, people can clean up most of their unsecured debt, including credit card expenses and medical bills.
Before and after people file for bankruptcy, they are required to take credit counseling courses, where they learn how to develop a budget, live within their means and stay clear of developing more debt in the future.
If you are considering bankruptcy as a way to help free you from your financial burdens, you may want to speak to an attorney regarding your financial options.
Source: Ebony.com, “The Bright Sides to Filing for Chapter 7 Bankruptcy,” Kara I. Stevens, Jan. 4, 2017.