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A Chapter 7 bankruptcy could be prudent financial planning

On Behalf of | May 13, 2015 | Bankruptcy

Many Virginia residents who file for Chapter 7 bankruptcy only do so after all other efforts to take control of an unmanageable financial situation have failed. Sometimes this is due to the social stigma that surrounds bankruptcy, and sometimes individuals put off seeking a financial fresh start due to fears over negative credit ratings and the difficulties that they will face when they seek to borrow in the future.

However, these worries are generally about short-term consequences, and many financial experts believe that they are preventing those with financial problems from reaping the possible long-term benefits of a personal bankruptcy filing. Other debt relief options, such as debt consolidation or a negotiated debt reduction, involve paying some or all of the debt back, but a Chapter 7 bankruptcy sees most unsecured debt discharged. This means that the money spent on debt repayment can instead be used in a more advantageous way.

While paying off a debt can provide a certain sense of accomplishment, it cannot improve an individual’s standard of living or assist with their retirement planning. However, using the money that would otherwise go to a credit card company or bank to invest in a retirement account or develop new job skills could achieve these goals. Those struggling to pay their bills have a number of debt relief options available to them, and they may be wise to consider their long-term goals when deciding which path to take.

A Chapter 7 bankruptcy offers a number of benefits for those with financial difficulties, and an attorney with experience in this area could explain the filing process and income qualification rules. In addition to providing the opportunity for a fresh start, a bankruptcy filing could offer more immediate peace of mind by putting an end to harassment from debt collectors.