What is Chapter7 Bankruptcy

As the name implies, the law of chapter 7 bankruptcy is contained in chapter 7 of the federal bankruptcy code. It is termed as ‘straight bankruptcy’. It provides an opportunity to the consumers to discharge their unsecured debts. It is a selling or liquidation proceeding in which the debtor’s non-exempt assets, if any are sold by the trustee and distributed among the creditors according to the priorities decided in the code. In most consumer cases, all the assets are free from obligation and therefore there are no assets to liquidate and there is no dividend to creditors. It is generally the easiest and quickest way of declaring bankruptcy and is easily available to individuals, married couples, corporations and partnerships. Common debts eliminated by filing for chapter 7 bankruptcy are credit cards, medical bills, personal loans and mortgages. At the time of filing chapter 7 case, all of the debtor’s property is temporarily supervised by the bankruptcy court and a case trustee. A bankruptcy attorney will help you to classify that which property comes under exempt property and which one under non-exempt. Exemption laws vary depending on which jurisdiction you live in.

Although a bankruptcy will stay with you on your credit record for a long time, the time to complete the chapter 7 bankruptcy processes, from filing the case to get final relief from debt, takes about 3-6 months. So, the compromise is a lasting impression against your credit which gives a freedom from most of the debts. Most state exemptions have very easy rules so that most things you own will be free from obligation from bankruptcy. Sometimes, it is allowed to keep more of your property than you need. Additionally, you will keep getting the salary or wages that you earn and the property you buy after filing for chapter 7. Your credit cards probably got you in this situation, so it is hard to see that as a bad thing. There are some lenders who specialize in lending to ‘bad risks’ although that is unfair characterization to make of someone who is trying to solve financial difficulties.

Now you can start rebuilding your credit sooner after declaring bankruptcy. Although, chapter 7 bankruptcy can be filed once in every six years, each filing appears on your credit record. Short of a court order from family court, nothing else will relieve you of your alimony and child support obligations. There is no way to get rid of student loan debt, and at least bankruptcy will save you from aggressive collection process of your lenders. Chapter 7 does not have any criteria for you to have debts of a certain amount in order to file for relief.

Can creditors take my pay check?

·         No, they cannot. Your wages won’t be garnished right away.

How will it impact on my credit score?

·         In this situation, you may be concerned about how to protect your credit score. Bankruptcy does have an effect on your credit score but not as bad as you might expect.

How much will it cost to file chapter 7 bankruptcy?

·         It will cost around $350 in filing and administrative fees.

Can I sell any of my property after filing for chapter 7?

·         Without the court’s consent, you cannot. Bankruptcy court will have the complete control of your all financial affairs.

Can I pay back family before bankruptcy?

·         No. Bankruptcy laws are set up so that you cannot treat one creditor differently than others.