Most people who file for Chapter 7 bankruptcy think they have no assets to lose and thus this is the easy way out of a debt situation. Such debtors need to think again. One of the top reasons to avoid Chapter 7 is that bankruptcy is never the easy way out of a debt. Why?

First, all of non-exempt assets are liquidated to pay off debts. If a debtors does not have any assets to lose, it may not be a problem (except of course their creditworthiness is irretrievably damaged and they can't get other loans to start over). If debtors do have certain assets they would rather not hand over, then they need to start looking for an alternative to Chapter 7 bankruptcy.

While we are still on the topic of creditworthiness, we should discuss another one of the top reasons to avoid Chapter 7. Most people who file Chapter 7 have no other assets or income; in short, they have nothing to fall back on. While Chapter 7 might make sense at first, they will probably want to start over. To do that, they will eventually need credit - a mortgage, a car loan or lease, a business loan, maybe even a student loan if they want to improve their employability. People who file Chapter 7 won't find it easy to get the credit they need because the Chapter 7 filing will not only taint their credit record for six to ten years, but it becomes a public record as well.

So while bankruptcy seems a good idea in the short-term, debtors need to keep their long-term financial goals in mind before making such a long-term sacrifice.

What Happens If You Don't File?

Debtors also need to consider whether their property can indeed be seized by creditors if they do NOT file. In some cases, serious delinquency empowers creditors to repossess pledged assets (also known as security) and/or force the debtor into bankruptcy. For debtors who believe there is an opportunity to maintain their assets outside of Chapter 7 (particularly if they do not qualify for Chapter 13), they should fight for this and not file voluntarily.

Not The Easier Option

In nearly all cases, debtors find that filing for Chapter 7 actually worsens their situation, both personally and professionally. Filing for Chapter 7 does not spare loan guarantors and often does not result in an immediate improvement to cash flow.

In fact, one of the biggest myths about Chapter 7 is that once a debtor files and the court order has been carried out, they are free of all debts. In reality, debtors may find that not only have their assets been seized and their credit record damaged, but they are still stuck with debts.

And wasn't this point of filing in the first place? 

Bottom line: Get the fact before taking a meeting with a bankruptcy trustee.

Chris has more than 15 years of experience in the financial services industry, having helped thousands of clients fix their personal finances. He the author of Help Fix My Finances, the e-book that serves as the premise of the Personal Finance Program of the same name. In his e-book, Chris stresses the importance of achieving a debt-free lifestyle and underscores the value of understanding your own After-Tax Cash Dilution Rate. He maintains a debt-free blog at HowToRepayDebt.com Article Source: http://EzineArticles.com/?expert=Chris_Blanchet