Chapter 7 Bankruptcy: Answers to 5 Common Questions

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chapter 7 bankruptcyIf you are researching the possibility of filing for chapter 7 bankruptcy (or conducting research on behalf of a relative or friend), then you may have already discovered that the line between fact and opinion can be quite blurry — especially on the web.

To help you get the information you need to make a safe and smart decision, here are clear, factual answers to 5 common questions regarding chapter 7 bankruptcy:

Question: Is filing for chapter 7 bankruptcy better or worse than filing for other types of bankruptcy?

Answer: This question cannot be answered without looking at each individual’s debt situation and available options. Generally speaking, however, many debtors who are eligible for chapter 7 bankruptcy choose this option, because it essentially erases most (and typically all) of their debt. Furthermore, chapter 7 bankruptcy filings are much simpler than other types, because there is no structured repayment plan that must be submitted to creditors for approval.

The REAL Reason Why Creditors “Warn” Debtors about Filing for Bankruptcy

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filing for bankruptcyMany people who are entitled to file for bankruptcy (i.e. they meet all statutory requirements), and whose financial best interests would be served through a bankruptcy filing, nevertheless continue to wage war with creditors for many months — or often years — because they’re told that filing for bankruptcy would be the equivalent of hitting the “self-destruct” button on their credit score and long-term financial profile.

This is patently untrue.

Yes, filing for bankruptcy is a serious decision, and should never be made without research, analysis and due diligence — including expert counsel from an experienced bankruptcy attorney (i.e. be very careful with any so-called “advice” from well-meaning but poorly-informed family members, colleagues, neighbors, internet posters, etc.). But with this being said, filing for bankruptcy certainly isn’t the financial catastrophe that creditors claim; often through aggressive and harassing phone calls.   

The Most Common Causes of Small Business Bankruptcy

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small business bankruptcyThere are some alarming — make that terrifying — small business bankruptcy statistics floating around the web that claim that the vast majority of small businesses don’t make it to their first birthday party. Thankfully, this isn’t the case. However, it’s not as if the truth is inspiring, either: just over 50 percent of small businesses fail within the first four years.

Naturally, a small amount of this failure is the result of tragic events like severe illness or death. But a far more sizable proportion of small business bankruptcy cases are triggered by the following:

4 Essential Questions to Ask a Prospective Bankruptcy Attorney

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bankruptcy attorneyMany experienced and reputable bankruptcy attorneys offer a complimentary initial consultation, which is smart and sensible for two reasons.

The first reason is that it enables a prospective bankruptcy attorney to learn about the basics of your current financial situation (i.e. not drilling down into details), so that he or she can get a solid sense of whether entering into a relationship is in your best interest. 

The second reason — and just as important — is that it gives you an opportunity to ask questions, so that you can determine if a prospective bankruptcy attorney is someone you should consider hiring.

Filing for Bankruptcy: Who Will Know, and Who Might Find Out?

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filing for bankruptcyDespite the fact that bankruptcy is a legal protection and not a moral judgement, most people who contemplate a bankruptcy filing are understandably anxious about “who’s going to know.”

The first thing to note, is that a bankruptcy is not (remotely) on the same level as a criminal conviction — especially for a felony or other serious crime — which can have significant negative consequences financially, vocationally and even socially or domestically.

What’s more, bankruptcy filings are hardly rare occurrences. Each year, about 800,000 individuals and businesses file for bankruptcy. And while the matter is obviously processed through the court system, the difference between bankruptcy proceedings and criminal proceedings (or even civil proceedings) is categorical.