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Chapter 7 bankruptcy: pros and cons

If you are one of the many Ohioans whose credit card and other consumer debts have accumulated to the point where you can no longer afford to make the payments, you may be considering Chapter 7 bankruptcy as a last resort for saving you from complete financial ruin.

It is true that Chapter 7 is the simplest form of bankruptcy, which is why nearly 71 percent of bankruptcy declarants choose it. There are, however, income guidelines to which you must adhere in order to be eligible to file a Chapter 7. Your best strategy is to consult with an experienced bankruptcy attorney who can explain the Ohio income guidelines and answer your other questions as well.

Chapter 7 advantages

One of the most appealing aspects of a Chapter 7 bankruptcy is that its automatic stay provision stops your creditors from harassing you by phone, text, email or any other way. Another is that it usually takes only three to six months from the time you file until the time most of your debts are discharged. Still another appealing aspect is that you do not lose everything in a Chapter 7 bankruptcy. Many of your assets are exempt.

While you will lose your credit cards, you can get new ones usually within one to three years after your bankruptcy and likewise repair your credit score and record. Your interest rate, however, likely will be higher than it is now.

Chapter 7 disadvantages

One of the biggest disadvantages of a Chapter 7 bankruptcy is that you probably cannot save your home from foreclosure. While the stay provision stops any foreclosure proceedings that your mortgage lender already started against you, this only forestalls the foreclosure. Chapter 7 does not discharge your mortgage obligation. If you cannot catch up on your mortgage payments during your bankruptcy, your mortgage lender can restart foreclosure proceedings once it is over. You probably will find it difficult to obtain a mortgage in the future, not only because of your foreclosure, but also because of your bankruptcy itself.

You can file Chapter 7 bankruptcy only once every six years. Consequently, what may be a short-term solution could turn out to be a long-term harm. In addition, Chapter 7 does not relieve you of your student loan debt or of any obligation you have to pay spousal or child support. However, that is a disadvantage of all types of bankruptcy.

Whether or not a Chapter 7 bankruptcy is right for you depends on your specific situation and the type and amount of debt that has put you in a financial bind. You may wish to talk to a knowledgeable bankruptcy attorney who can explain your various bankruptcy options and guide you through the process.

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