If circumstances arise and you can no longer pay your mortgage or your other bills because of your financial situation you may want to consider filing for Chapter 7 bankruptcy. There are a number of misconceptions about bankruptcy, especially when people are not familiar with the bankruptcy process as well as the possible benefits.

Financial stress can impact every aspect of your life from your personal relationships to your performance at work. Fortunately, there are options to debtors for getting out of debt; however, there are both advantages and disadvantages associated with Chapter 7 bankruptcy.

Million Dollars
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Also known as liquidation bankruptcy, Chapter 7 bankruptcy can eliminate many, if not most, of your debts so you can secure a fresh financial start. In 2011, over 1.3 million people filed for personal bankruptcy in the United States, the majority of them filing for Chapter 7. Before you make a decision on filing for bankruptcy, make sure you understand the disadvantages and advantages of all your bankruptcy options so you can make an informed decision.

Some advantages of Chapter 7 bankruptcy include the following:

You do not have to make any more payments to most creditors
All collection efforts from creditors are forced to cease. This means no more letters or harassing phone calls.
You can start rebuilding your credit
Wage garnishments stop
State exemptions let you keep most of your assets / property
Although bankruptcy doesn’t get rid of all debts it can free you to focus on paying off student loans, child support, and other non-dischargeable debts

On the other hand, some disadvantages of Chapter 7 bankruptcy include the following:

Like other forms of bankruptcy, it can negatively affect your credit score
Can appear on your credit report for up to 10 years
Can lose property that is not exempt
Lose all credit cards
Does not discharge debts like student loans, alimony, or child support
Once you file for Chapter 7 bankruptcy, you cannot file for Chapter 7 bankruptcy again for another eight years

If you have any questions about the above points, you may be able to find an answer by asking a legal professional.

Donna Swanson is a professional legal blogger who discusses a number of legal topics such as Chapter 7 bankruptcy and how a bankruptcy lawyer can help you if you are facing unmanageable levels of debt.

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