Making the decision to file bankruptcy of any kind is difficult, but most look back and agree that it was in the best interest of their financial future. In terms of the variety of bankruptcy filed, the majority of individuals tend to lean toward a Chapter 7 bankruptcy.
There are multiple reasons for this, but it is important to understand the pros and cons of a Chapter 7 bankruptcy. According to Findlaw, one of the most enticing positives to a Chapter 7 bankruptcy is the fresh start.
What is the “fresh start?”
The idea behind a Chapter 7 bankruptcy is to wipe the slate clean of the majority of debts. A Chapter 13 bankruptcy, on the other hand, focuses more on the debtor keeping his or her assets. Liquidating assets can be a very trying component of a Chapter 7 bankruptcy, but the result is the aforementioned fresh start.
Another major advantage of a Chapter 7 bankruptcy is that the debtor will be able to hold on to future income. There is also no attached repayment plan, there is zero limit on the amount of debt a person may have when filing for a chapter 7, and once you file Chapter 7 bankruptcy all debts go away very quickly.
What are the negatives to Chapter 7?
A Chapter 7 bankruptcy will stay on your credit report for longer than a Chapter 13 bankruptcy: 10 years, to be exact. You will also lose access to all of your current credit cards and it will be very difficult for you to obtain a mortgage in the near future.