Chapter 7 bankruptcy is a type of bankruptcy most commonly heard about and referred to when you consider what bankruptcy is. However, it's not the only type. In fact, Chapter 7 is just one of many kinds, from Chapter 11 to 13 or others.
Chapter 7 bankruptcy is liquidation bankruptcy. There are pros and cons to this kind of bankruptcy, so you should know them before you decide to file for Chapter 7.
What are some benefits of Chapter 7 bankruptcy?
Chapter 7 bankruptcy takes only about three to six months to complete, making it one of the fastest kinds available today. In just a few years, you may be able to get new lines of credit, too. Chapter 7 offers a variety of exemptions for your property, so although you may have to sell or liquidate some assets, other assets, which could include your primary residence or vehicle, could be exempt and stay in your possession.
Chapter 7 bankruptcy can be filed once every six years. When you file and complete the process, most of your debts are cleared, allowing you to start rebuilding your credit immediately.
What are some cons to Chapter 7 bankruptcy?
Bankruptcies can make it harder to get a mortgage if you don't have one already, and it won't help you get rid of large bills like your student loans or tax bills. If you file for bankruptcy now and run into trouble in the future, it may be impossible to file for Chapter 7 bankruptcy again for some time. You won't be relieved from duties involving alimony or child support when you're in bankruptcy, either.
Source: FindLaw, "Pros and Cons of Declaring Bankruptcy under Chapter 7," accessed May 20, 2016