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Filing a bankruptcy claim can be a very stressful procedure, specially when you do not really know what chapter to file for. And now with the new law, some individuals will not even have the chance to choose, they will either qualify for both chapters or just for Chapter 13. The idea behind this measure is to prevent wealthy families from filing for Chapter 7: now their options are limited. But those lucky ones who do have the chance to make a choice, are at a loss.

This article seeks to become a guide for those who are more inclined to file for Chapter 7. Here we will discuss the advantages this chapter has over the second most common chapter and the obvious disadvantages related to the latter. Enjoy!

Wonders Of Chapter 7 Bankruptcy

Chapter 7 is the most common type of bankruptcy and it is filed by most debtors when in need. But what is it about this specific bankruptcy type which makes it so appealing to most debtors? Well, first of all, its simplicity. It is easy to file and quick as you would not believe. We live in a fast turning world in which rapidness is a very valuable feature. For you to have an idea of how fast this claim can be, an average case takes between four to six months in being closed! No wonder why this chapter is so popular, huh?

Before getting your hopes up, you should know that not all types of debt can be discharged or wiped off your credit report. But this does not have much to do with the type of chapter you are going to file (there are some exceptions). Some debts cannot be written off at all, these are, for example, tax related debts, some types of student loans (usually those owed to the state), child support debts, spouse maintenance debts, etcetera.

Downside Of Chapter 13 Bankruptcy

We all know that the disadvantages of an object or a procedure cannot be counted as advantages of another, but in this case, I will make an exception. It is undeniable that Chapter 13 carries many advantages to it and has worked wonders for many debtors, but of course it depends on your particular situation.

In Chapter 13 bankruptcy, as opposed to Chapter 7, debts have to be paid off. There is no way around this. Repayment plans are planned out and debtors must stick to it in order for their debts to be discharged (once completely paid off, of course). These repayment plans may last up to five years. As discussed before in this very same article, time is a very important issue for many individuals, and having to put up with a bankruptcy case for such a long time might not appeal to a lot a debtors, specially if they are in need of a fast fresh start.

To Sum Up

Contrary to what you must think, I do not lean towards any of the two chapters. I believe it is a very personal decision which must be thought over carefully in order not to make mistakes you might regret in the future. This is not a issue which should be taken lightly. In any case, get advice from a lawyer: there is nothing better than discussing your options with a professional.

Hilary Bowman is the author of this article. She works successfully as a financial advisor with years of expertise on Unsecured Loans. Hilary publishes informative articles about home loans, credit cards, auto loans, loans for people with bad credit, business loans and others at http://www.fastguaranteedloans.com

If you have gotten into debt to the point where you see no escape from it and it just keeps getting worse then the best course of action for you to take is to file for Chapter 7 bankruptcy. A Chapter 7 bankruptcy will have you finished and done with the bankruptcy in six months time. You also will not be required to pay back the debts that got you into the mess in the first place. The bad news however is that your credit report will show the bankruptcy for a period of 10 years (from the date it was filed) and your credit rating will suffer terribly because of it. This will limit the kinds of credit that you may be qualified to receive for those 10 years.

When faced with this decision, it is essential that you figure out what the worst scenario is- living with mountains of debt (which affects your credit adversely any way) or filing for Chapter 7 bankruptcy and being rid of debt but having an even more tarnished credit rating. Be aware that this type of bankruptcy can be filed only once in a 7 year period.

A Chapter 7 bankruptcy can help a person to get back on their feet in a financial sense but it can also ease much of the stress and mental anguish that accompanies constant worries about a lack of money to pay bills. New stricter laws came into effect in October 2005 regarding Chapter 7 bankruptcies that have made it more difficult for some people to qualify. For example, those who make what is deemed as a high income are more likely to have to file for Chapter 13 bankruptcy which involves a repayment plan and debt reorganization. Financial counselling is required for individuals wishing to file for bankruptcy to determine which is more suitable for them- the Chapter 7 or the Chapter 13.

Always check over your credit report following a bankruptcy. Not all creditors inform the credit bureau that a debt has been cleared following a discharge. It then becomes the former bankrupt individual's responsibility to become proactive and make sure that their credit report looks as it should. Once that is completed, the next step is to apply for a secured credit card.

Before you even begin to contemplate applying for a mortgage after bankruptcy, find a qualified and experienced mortgage specialist whom you can trust and whom you feel comfortable speaking with about your financial circumstances. This person can work with you to help you to walk the long and arduous road to improved credit and more financial stability.

Obtaining a mortgage following a Chapter 7 bankruptcy is not an impossibility. However you must plan accordingly and take the right strategic steps. There are some mortgage lenders who will give you the highest grade shortly after your bankruptcy has been discharged. This of course is contingent on your payment history in the past. You would be better off waiting for awhile until the bankruptcy recedes further into the past and you have given yourself the time you need to re-establish your credit adequately before moving ahead with a mortgage application.

DJ Raymond frequently writes about mortgages and personal finance . To learn more about the mortgage process visit Compare Mortgage Rates for tips on How to Compare Mortgage Rates

Facing Bankruptcy

If you face the possibility of bankruptcy you should first seek alternative solutions as soon as possible through either an individual voluntary arrangement or via a debt management plan. Bankruptcy carries a bad stigma and is a traumatic experience especially as it involves going public with your financial situation. But remember bankruptcy is just one option amongst many that you should consider if you cannot pay your debts.

Benefit and Implications of Bankruptcy

The benefit of taking bankruptcy proceedings allows you to start over again, subject to some restrictions. However, the implications of bankruptcy means that you will lose control of all your assets, cannot act as a company director, obtain credit over a certain limit without permission from the lender, your credit will be effected for many years and you face the possibility of being publicly examined in court.

Your Home

One of the most important factors in a bankruptcy concerns the family home. Unfortunately all personal assets are the responsibility of the Official Receiver or trustee and they have the right to sell your home as payment towards your debts. The time scale of the sale will depend on whether you have dependents living with you i.e. spouse and/or children; in some cases the sale can take place after the first year of bankruptcy. If your spouse, friend or a relative is able to buy your interest in your home it will stop the Official Receiver from selling it.

Alternatives to Bankruptcy

The alternatives to bankruptcy include an Individual Voluntary Arrangement (IVA) that is based on a formal and legal binding arrangement between the debtor and creditors, with regular payments being between three to five years. Trust Deeds and Debt Management Plans provide avenues to negotiate with creditors and reducing payments owed, generally performed by agencies on your behalf.

Reversing a Bankruptcy

You do have the option of reversing a bankruptcy and obtaining an annulment at any time if you can pay all bankruptcy fees, debts and creditors in full or to the satisfaction of the courts or if the bankruptcy order should not have been made in the first instance.

Essential Tips in Avoiding Bankruptcy Altogether

Your financial future depends on your cash flow, do not spend more than you can afford to. Make a list of all the essential items that you MUST pay for each month and look into ways to reduce any expenditure. Create your monthly budget and stick to it. If you want to spend more make more, supplement your income. Be creative, think about your interests, skills and seek ways to earn from them. Take a part time position or better still start your own part time business, you are only limited by your belief that you cannot do any more than you are already doing to make money.

If you find yourself spending more than you can afford, then you are most likely already living on credit. High interest rate debt is the one of the worst kinds of credit to be associated with, you will be paying high rates of interest and if you miss any monthly payments it will affect your future credit rating. Try and avoid this type of debt by spending within your means, reducing discretionary spending and/or by supplementing your income.

Remember too that you might fall ill, lose your job, so it is important to set some money aside and forget about it. Cash flow is to blame for any bankruptcy and not having full control of your current financial situation will impact your future.

Wayne English writes on financial related issues. You can learn more by visiting my blog, Dealing with Bankruptcy. http://dealing-with-bankruptcy.blogspot.com