Is filing for Chapter 7 bankruptcy worth it?

When in serious debt, most relief options sound appealing -- that is, outside of filing for bankruptcy. Bankruptcy is something that you and many other New Mexico residents may feel like you need to avoid as you have likely heard nothing more than horror stories about this form of debt relief. Chapter 7 bankruptcy can significantly improve your financial situation if you're willing to let it.

There are many advantages to pursuing a Chapter 7 filing. Of course, this form of bankruptcy protection also has some disadvantages. Understanding what they are can help you as you try to decide if seeking Chapter 7 relief is worth it for your particular situation.

Advantages and disadvantages

Before addressing the negative aspects of a Chapter 7 filing, let's discuss how it can be beneficial for you. The main advantages of this form of bankruptcy are:

  • Fast process -- usually completed in three to six months
  • Immediate debt relief upon court approval
  • Ability to keep certain property
  • Stops creditor harassment
  • Ability to apply for credit in one to three years

All this may sound great, but it is only half of the story. The disadvantages of this form of debt relief may be a turn off for you. Some of them include:

  • Non-exempt property may be sold to pay off creditors
  • Not all debts will qualify for discharge

If you have significant assets, this form of bankruptcy may not be for you. If you have student loan debt or court-ordered payments that are in arrears, Chapter 7 may not be able to help you. If you have too much disposable income, this form of bankruptcy may not even be an option, but another type may work for you.

The good news is that if you have a regular income, you may be able to choose Chapter 13 bankruptcy as a viable option. In Chapter 13, you may be able to protect your non-exempt property -- even if you qualify for Chapter 7. Moreover, if you are in arrears on secured debts or some non-dischargeable debts, Chapter 13 may allow you to work on past due balances for these debts during the process.

The good news is that if you have a regular income, you may be able to choose Chapter 13 bankruptcy as a viable option. In Chapter 13, you may be able to protect your non-exempt property -- even if you qualify for Chapter 7. Moreover, is you are in arrears on secured debts or some non-dischargeable debts, Chapter 13 may allow you to work on past due balances for these debts during the process.

Is it worth pursuing?

This is a question you have to answer for yourself. Filing for Chapter 7 bankruptcy protection is a very personal decision. No one can tell you if it is the absolute right thing to do for your situation. Weigh the pros and cons, do your research about this and other debt-relief options, seek guidance on the matter from an experienced bankruptcy lawyer to help you to better understand your legal options. 

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