{"id":286906,"date":"2016-04-04T10:41:50","date_gmt":"2016-04-04T15:41:50","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/bankruptcy\/chapter-7\/pros-and-cons-of-declaring-bankruptcy-under-chapter-7.html"},"modified":"2026-07-30T10:37:34","modified_gmt":"2026-07-30T15:37:34","slug":"pros-and-cons-of-declaring-bankruptcy-under-chapter-7","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/chapter-7\/pros-and-cons-of-declaring-bankruptcy-under-chapter-7.html","title":{"rendered":"Pros and Cons of Chapter 7 Bankruptcy"},"content":{"rendered":"\n
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Pros and Cons of Chapter 7 Bankruptcy<\/h1>\n\n
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\n By Christie Nicholson, J.D.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Chapter 7 bankruptcy<\/span> eliminates most unsecured debts<\/span> within three to six months and gives you a fresh financial start, but it remains on your credit report<\/span> for 10 years. It may also require that you sell non-exempt property<\/span>. Whether Chapter 7 is right for you depends on your income level, the types of debt<\/span> you have, and what assets you need to protect. Understanding both the benefits and drawbacks can help you decide if filing <\/span>Chapter 7 bankruptcy<\/span> is your best option.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

While filing Chapter 7 or Chapter 13 bankruptcy<\/span> is a big step, it can also improve your quality of life. Not only can a bankruptcy filing<\/span><\/a> eliminate some of your debt, but it also stops phone calls<\/span> from creditors and collection agencies. Either bankruptcy option<\/span> can also provide you with much-needed debt relief<\/span> and a roadmap for getting your finances in order.<\/p>\n

There are consequences to consider as well. Filing a Chapter 7 <\/span>bankruptcy<\/span><\/a> petition<\/span> will impact your credit score<\/span> and force you to pay higher interest rates<\/span> on any new loans or credit cards<\/span> you acquire.<\/p>\n

This article discusses the pros and cons of filing a Chapter 7 <\/span>bankruptcy<\/span> case<\/span> and what to consider before making a final decision. If you still have questions about whether to file <\/span>Chapter 7 bankruptcy<\/span>, consider contacting a bankruptcy law<\/span> attorney<\/a> near you.<\/p>\n

Is Chapter 7 Bankruptcy<\/span> Right for You?<\/h2>\n

Chapter 7 bankruptcy<\/span> can put an end to late notices and collection actions<\/span>. It may also address threats of legal action, such as foreclosure<\/span>, repossession<\/span>, and lawsuits. Filing a Chapter 7 bankruptcy<\/span> is a serious undertaking and should be a last resort. Before filing anything with the court, taking the time to determine if a Chapter 7 bankruptcy<\/span> is the best solution for you and your financial situation<\/span> is a very good idea.<\/p>\n

Who Benefits the Most From Chapter 7?<\/h3>\n

Chapter 7 bankruptcy<\/span> is not for everyone. If your only major debt is your mortgage and you\u2019re afraid of going into foreclosure<\/span>, a Chapter 7 case<\/span> probably isn\u2019t your best option. The same is true if you have mostly secured debt<\/span>, such as a car loan<\/span> or home equity line of credit.<\/p>\n

Chapter 7 benefits people who have mostly unsecured debt<\/span> and few assets. It\u2019s often a better fit for people with a lower income, as a bankruptcy court<\/span> that determines you make enough money to pay your debts in full is unlikely to approve your Chapter 7 petition. They will either dismiss your case altogether or suggest that you convert it to a Chapter 13 <\/span>bankruptcy<\/span> petition<\/span>.<\/p>\n

Chapter 7 is a better option for people with mostly unsecured debt<\/span>. In Chapter 13, the bankruptcy court<\/span> expects you to repay your debts, not discharge them. In Chapter 7, the bankruptcy judge will discharge most or all of your debts, especially unsecured debt<\/span>. Since the whole point of filing bankruptcy is to get a fresh start<\/span>, it makes more sense to seek a discharge of your debt rather than a reorganization.<\/p>\n

Who Should Consider Chapter 13 Instead?<\/h3>\n

If you own a lot of assets or earn more than your state\u2019s median household income, you\u2019ll likely end up with a Chapter 13 instead of a Chapter 7. The purpose of Chapter 13 bankruptcy<\/span> is to restructure your outstanding debt while allowing you to keep your assets. If you have personal property and real estate that you don\u2019t want to lose, Chapter 13 is the better option. As long as you don\u2019t have a ton of equity in your home, there\u2019s a good chance the trustee will let you keep it and include your mortgage arrears in your repayment plan<\/span>.<\/p>\n

Chapter 13 is a common choice over Chapter 7 for filers in higher income brackets. To qualify for Chapter 7, you must demonstrate that you earn less than your state\u2019s median household income. If you make too much, the trustee will either dismiss your case or recommend you file Chapter 13.<\/p>\n

Factors To Consider When Deciding Which Type of Bankruptcy<\/span> to File<\/h2>\n

Deciding to file bankruptcy is never easy. Part of moving forward is choosing the type of bankruptcy<\/span> you\u2019re going to file. Knowing the pros and cons of each type of bankruptcy<\/span> can help, but there are other considerations to consider. Some of these factors include:<\/p>\n