Individuals and business owners who are looking for a way to handle their debt may wish to file for bankruptcy. Chapter 7 is one of the most common forms of bankruptcy, and it involves liquidating assets and using the funds to pay creditors. Some assets may be exempt from liquidation, which means that a debtor gets to retain those items even after filing. If a business files for Chapter 7 protection, it will no longer remain in operation.
Individuals who file for bankruptcy should understand that some debt will still remain after filing. Student loan debts generally are not discharged unless being required to pay will impose a hardship on an individual. Child support, alimony and certain tax debt will also remain after filing for bankruptcy. A Chapter 7 bankruptcy will remain on a person’s credit report for up to 10 years.
During that time, a person’s credit score may drop, and this is one of the potential negative consequences related to filing for bankruptcy. Other consequences include paying attorney fees, filing fees and court costs. Usually, Chapter 7 cases cost less than Chapter 13 cases because they are resolved in a shorter period of time. After a case has been resolved, it may be a good idea for a person to check his or her credit report for inaccurate information.
By filing for Chapter 7 bankruptcy, an individual may discharge his or her debt in a matter of weeks or months. While the case is ongoing, creditors generally cannot make contact with a debtor or engage in collection activities. Other benefits to a Chapter 7 filing include the ability to discharge debt while possibly paying creditors less than what is owed. In some cases, those with insufficient assets may pay nothing at all to creditors.