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The pros and cons of Chapter 7 bankruptcy

Californians who are backed into a financial corner may start seeking new options to alleviate their stressful burdens. One such option is filing for bankruptcy, but there are many different types of bankruptcy that can be applied for. Each serves its own purpose, and each has its own benefits and drawbacks. First, we'll look at Chapter 7, the most popular form of bankruptcy.

The United States Courts shows that unlike Chapter 13 bankruptcy, Chapter 7 bankruptcy does not involve a repayment plan. This can be a benefit to anyone who simply doesn't have the money or time to work toward paying their debts off. Chapter 7 bankruptcy is essentially wiping the slate clean, getting rid of many different debts no matter their size and allowing the filer to have a fresh start. Filing for Chapter 7 will also stop harassment from creditors in its tracks.

FindLaw lists out a few of the cons that Chapter 7 bankruptcy can hold. One of the biggest hurdles is the fact that property may be repossessed and sold in order to help pay off debts. Luxury items and even things like cars could be auctioned off, making this a bad choice for people with attachments to their possessions. There's also the mark that bankruptcy can leave behind. It will remain on credit reports for up to 10 years, and can make it difficult for someone to get a mortgage or reapply for new credit cards.

In the end, the decision will vary from person to person as the benefits and drawbacks will be weighed differently by everyone. It's largely a matter of trial and error or research to find what works the best for any given situation.

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