5 Key Benefits of Chapter 7

The great majority of individuals needing to get rid of their debts seek protection under Chapter 7.  In this type of filing, all of your debts that can be eliminated are wiped out and you receive what attorneys frequently refer to as a "fresh start," free from unwanted debt.  In rare cases where the value of your assets exceeds what you are allowed to keep under your exemptions, your creditors are paid part or all of their claims through liquidation of your property.


Typically, individuals wanting to file for bankruptcy in San Diego choose between Chapter 7 and Chapter 13, the second most common type of bankruptcy filing.  The 5 key benefits of Chapter 7 are as follows:


1. The process is quicker.  The entire process lasts for about 90 days, from the date of filing until the date of discharge.  If your case is prepared and executed by a skilled San Diego bankruptcy attorney, and the trustee and creditors do not raise any objections, the court will grant you a speedy discharge.


2. Future income is protected.  The income that you earn in the future does not become part of your bankruptcy proceedings. Typically, only the income that you earned in the six months prior to bankruptcy filing is considered in your case.  By contrast, in a Chapter 13 case, you have to contribute your disposable income to your Chapter 13 plan for three to five years.


3. No monthly payments to the Court.  There is no need to worry about making monthly payments to the court.  Payments to the Court are only made in repayment bankruptcies, such as Chapter 13, and Chapter 11 and 12.  Moreover, monthly reports are not required to be submitted, as they are in Chapter 11 and 12 cases.


4. Legal fees are less.  Legal fees typically are less than in Chapter 13 or any other chapter.  This is because you would usually hire an attorney only for a period of three to six months.  Depending on your circumstances, however, a Chapter 7 fee may be greater than a Chapter 13 fee.  If your case involves a significant amount of pre-bankruptcy planning, then the fee would be adjusted to account for the addition time spent by your attorney making sure that you obtain the best results from your San Diego bankruptcy filing.


5. Buy back your car for its current value.  Unique to Chapter 7 is the ability to buy back a secured asset for the current retail market value.   For example, if you have a car worth $5,000 but you owe $12,000 on it (not an uncommon scenario if you have a high interest rate and put little money down), then you can buy back your car for $5,000.  If you don’t have the money to buy back your car, you can borrow it.  There are companies that will lend you money, while you are in bankruptcy, for the specific purpose of buying back your car through a redemption.


Summarizing, a Chapter 7 bankruptcy filing is more advantageous to individuals because it enables them to recover quickly, protect their income, avoid making monthly payments to the Court, pay less in legal fees, and buyback a car for its retail market value.