Some advantages of straight bankruptcy
The last resort that the debtors with large amount of unsecured debts can explore is to go for bankruptcy filing. And, among the bankruptcy filings, that most common type is the straight bankruptcy. Through bankruptcy filing, you the debtor, ask the bankruptcy courts to provide relief from the creditors. The bankruptcy court assesses all the properties of the debtor and uses a part of the properties to return back at least a part of the money of the creditors. Whatsoever, it is recommended that at the time of filing for bankruptcy, you should consult an attorney. You can file for bankruptcy yourself also.
However, the 2005 law has made filing for bankruptcy more difficult. The aim of the law is to reduce the number of personal bankruptcy cases. Now, if you are into a serious debt crisis and want to file for bankruptcy, you need to undergo the means test. In this test, your income is compared to the median income of the individuals residing in your state. You will be eligible for straight bankruptcy, if your income is less than the median income of the entire state. In the straight or chapter 7 bankruptcy, your assets are liquidated and are used to return back at lest some part of the money of the creditors. Whatsoever, there are many benefits of chapter 7 bankruptcy, which are listed below.
- Though the negative impact of bankruptcy stays in your credit report for long, it takes three to six months to complete the process. So, by going into bankruptcy you are trading off between the long-term negative effects on your credit report with freedom from debt.
- Going into bankruptcy does not imply that you will never be eligible to obtain new lines of credit. You will be able to obtain new lines of credit within one to three years of filing for the bankruptcy case. However, to obtain new credit, you will have to pay higher rate of interest.
- You can file for straight bankruptcy once in every six years. However, in case of another financial disaster, you can file for chapter 13 bankruptcy before you are eligible to file for chapter 7 bankruptcy.
- Bankruptcy helps you avoid getting harassing collection calls from the collection agencies.
Anyways, going into bankruptcy is not at all good for your credit report. Unless and until you take adequate steps to repair your credit rating, it will indeed be difficult to obtain fresh credit.
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