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Benefits of Chapter 7 bankruptcy outweigh the disadvantages

Despite the few disadvantages of filing for bankruptcy protection, there are numerous advantages. Chapter 7 bankruptcy can eliminate many debts without requiring the Pennsylvania filer to pay anything toward the outstanding balances. Although some debts, such as student loans, alimony and child support cannot be discharged in bankruptcy, eliminating consumer debt and medical bills might make it easier to make the payments on educational debts and family obligations.

An individual may only have their debts discharged through Chapter 7 bankruptcy once every six years. This limitation may cause some people to delay filing for debt relief. However, there is generally no cap on the number of times a person can file for Chapter 13 debt reorganization. Those who use Chapter 7 and then get into debt trouble again within six years can reorganize their debts under Chapter 13 if they qualify.

Bankruptcy stays on the filer's record for up to a decade. However, the length of time between when a Chapter 7 petition is filed and when eligible debts are discharged is typically less than six months. While affordable credit may be more difficult to obtain immediately after bankruptcy, there are several lenders that specialize in making loans to risky clients so it isn't impossible to get a credit card or even a mortgage a few years after filing for Chapter 7 bankruptcy.

Some people won't qualify for Chapter 7 bankruptcy due to the amount of their income or assets. In these cases, Chapter 13 may still be a viable option. A bankruptcy attorney can determine whether a client is eligible for Chapter 7 and explain the other requirements to ensure that an informed decision is made.

Source: FindLaw, "Pros and Cons of Declaring Bankruptcy under Chapter 7", accessed on Feb. 9, 2015

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