Once the decision is made to file a bankruptcy case, a consumer debtor has to make a choice: is it better to file a chapter 7 or chapter 13 bankruptcy?
There are advantages to each chapter. To make the best decision regarding what chapter to file, it’s good to know the benefits of chapter 7.
Chapter 7 is (relatively) quick. From start-to-finish, most chapter 7 cases are over in four to six months. As legal processes go, a chapter 7 moves fairly quickly. So for the person who wants to put the part of their life where hard-to-handle debt was dominating them, chapter 7 offers a quick resolution and a fresh start.
Chapter 7 attorney fees are usually less expensive. Because chapter 7 cases do not take a significant amount of time, from the date of filing to the date of discharge, and because attorney fees have to be disclosed – and are subject to review by bankruptcy judges, attorney fees in chapter 7 tend to be on the low end of fees for legal services. It’s also quite typical that chapter 7 fees are “flat” fees – that is, a chapter 7 debtor is not charged an hourly fee by the debtor’s attorney.
Chapter 7 is efficient. What chapter 7 does best, in my view, is to discharge dischargeable debt quickly. Most of the common unsecured debts that people carry with them – such as retail charge cards, revolving credit cards and medical bills – are efficiently discharged in a chapter 7 case.
Rebuilding credit can begin more quickly. Receiving a bankruptcy discharge will, for most people result in an improvement in their credit score, since a debtor’s debt-to-income ratio will improve once the bankruptcy discharge is entered. Since the discharge will be entered in a few months after the case is filed, chapter 7 offers individuals who want to improve their credit score faster access to that rebuild than a person who doesn’t file a bankruptcy and tries to aggressively pay down balances, or the person who files a chapter 13 bankruptcy case. This isn’t a hard and fast rule, though, and in another post I’ll write about the length of time a bankruptcy case stays on your credit report – there’s a difference between chapter 7 and chapter 13!
So there you have some advantages of filing chapter 7 – cost, speed, efficiency and the ability to start rebuilding credit faster. Is chapter 7 the right choice for you? The attorneys at Kain + Henehan can give you the benefit of their knowledge and experience in advising you, Visit our website: www.kainhenehan.com to find out more!
