Chapter 7 Bankruptcy: Pros & Cons


You have exhausted all options.  You’ve reduced expenses, skipped meals, you’ve tried everything to save money but see no progress. Chapter 7 Bankruptcy could be a way out. But, how will it work for or against you?

How Chapter 7 Bankruptcy works.

First, Chapter 7 Bankruptcy Liquidation is a way of debt relief in which a court sells your assets -with some exceptions- in order to pay back your creditors (the remaining unpaid debt is erased).  

It’s called Chapter 7 because it is the 7th chapter of the Bankruptcy Code.

There are two phases to the process:

  1. The Planning stage where you gather information and meet with a lawyer. The courts are going to want tax returns, pay stubs, bank statements and other evidence of income or assets. Never rush the plannning stage because it can adversely impact your financial options later.
  2. After that, Filing stage is next. A petition, a timeline and a statement of financial affairs are filed with the court to start the bankruptcy process. Moreover, it takes on average 3 months for you to receive the notice of completion.


  • All qualified debt would be wiped away, including credit card or medical bills.
  • Creditors must stop collection efforts and can’t contact you or garnish your wages.


It can be stressful can be stressful.

Ever-changing regulations make the paperwork more complex every year and force the courts to demand more and more of your financial information.

Bad for your credit.

  1. Chapter 7 Bankruptcy stays on your credit report as a Public Record for 10 years.
  2. It can cause severe damage to your ability to obtain short and long term credit.

It disrupts your life.

  1. The trustee can seize and sell your nonexempt property, such as boats or RVs.
  2. You will find it more difficult to get a job in certain fields, such as bookkeeping, accounting, payroll, and so on.
  3. You can’t apply for housing or food stamps.

Unlike Chapter 13, Chapter 7 Bankruptcy is not a payment plan.

In conclusion, filing for bankruptcy chapter 7 is a big deal and you don’t want to go into the process unprepared.  Explore all options, try some coaching and definately get professional help.

Contact us, no obligation.