When provided the option, a majority of debtors prefer filing Chapter 7 bankruptcy since it discharges the most debt. However, a qualified debtor may have the debt discharged in exchange for relinquishing valuable, nonexempt property for the trustee to sell in order to pay creditors. Despite losing property, there are multiple benefits for filing Chapter 7.
The advantages of Chapter 7 bankruptcy include the following:
- You get a “fresh start.” Chapter 7 bankruptcy is designed to give debtors a new beginning by eliminating particular debt, freeing them from personal responsibility for the discharged debt. Nevertheless, there are several types of debt that can't be discharged, such as child support, alimony, student loans (unless the court determines otherwise), certain taxes, and debts derived from fraud.
- No limits on the amount of debt. As opposed to Chapter 13 bankruptcy, Chapter 7 rules do not set limitations on the amount of debt a filer may possess. According to Chapter 13, a debtor can be ruled ineligible if secured or unsecured debt surpasses the debt limits.
- You can keep income in the future. The property debtors obtain or will acquire once Chapter 7 is filed will not be included in the bankruptcy estate. However, specific property that is acquired within 180 days after filing for Chapter 7 will be part of the estate. This rule pertains to property which is inherited, property from a divorce or settlement agreement, death benefits, or life insurance policy proceeds.
- There is no repayment plan. Under Chapter 7, debtors are not required to repay the debt in a repayment plan that is court approved. You will not be responsible for repayment once it is discharged.
- Debt discharge quickly occurs. Generally, the discharge of debt may happen in about three months. The court will issue a discharge order in about 60 to 90 days once a debtor files for bankruptcy. After the trustee allocates a debtor's property to unsecured creditors, the court will consider the case closed.
For more information about Chapter 7 bankruptcy in Virginia and if you qualify, contact Bruce W. White, P.C. and request a free case evaluation with our Richmond bankruptcy attorney today.