Under Chapter 7 bankruptcy code, and depending on the state, the debtor can hold their property that is specifically “exempt.” It could be anything from the tools of one’s trade, limited equity in a car or house, and some personal effects.
Reasons for Filing Chapter 7 Bankruptcy
Debt can and has struck many people at any age and any situation. Filing for chapter 7 bankruptcy is not the best option unless you are in a huge financial debt and even then there may be alternatives. The reason chapter 7 bankruptcy is not the best option is because it looks to future creditors that you just gave up and did not try to payback your debts. It may be harder to obtain loans. Carefully consider your options when filing for chapter 7 bankruptcy. Many people will file for chapter 13 which is not considered as harsh as chapter 7 bankruptcy. Information regarding bankruptcy can stay on credit reports for up to ten years.
If a five year plan is not possible given your situation, then you may be better off liquidating your assets under chapter 7 bankruptcy. Remember that bankruptcy should be the final and last resort possible.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is when you liquidate all of your assets. As a debtor you have to carefully look at all of your debt and make a list of your creditors and then file for chapter 7 bankruptcy. From here on out you will be working with your attorney to help you through chapter 7 bankruptcy. One of the things your lawyer will help you with is sending out letters to all your creditors telling them to cease and desist collection. In most states you are given a 30 to 45 day stay. This allows you time to decide what debts you should liquidate and what you should reaffirm. Your unsecured loans are typically the first to be liquidated. Consult your lawyer if you are unsure on a loan or debt. Chapter 7 bankruptcy is designed in a way that puts the creditor in a weak position.
If the debts are collateralized, the consumer has the option to reaffirm. If the consumer signs a reaffirmation agreement, then they accept to continue paying the bill and everything goes on as if nothing happened. If the creditor feels they could end up with abused or ruined collateral during the time of the stay, they can file for lifting the stay to pick up their collateral for protection.
Your chapter 7 bankruptcy lawyer and you will then have to go to bankruptcy court and file final papers. If your creditors want to discuss concerns or problems, you can set up what is called, “a meeting of creditors.” They will meet with your chapter 7 bankruptcy lawyer. This happens before the judge makes the decision about the chapter 7 bankruptcy case. Once the judge is in control of the case from this point he can decide what happens. If the judge feels like something is not right, he can dismiss the case and it will be as if the chapter 7 bankruptcy was never filed. This leaves you in the position of having to pay for all your previous debt and now having to pay for all the costs of filing and going to court.
There are individuals who believe that by filing for chapter 7 bankruptcy they will have a clean slate and it will outweigh all the negative effects. Most people who decide to file for chapter 7 bankruptcy are not adequately informed. They get zapped into believing that filing for chapter 7 bankruptcy will solve all their problems. Many will listen to their overly passionate bankruptcy lawyer and not get second or third opinions. The lawyers are the ones who benefit from the person’s loss. There are always alternatives. If they make it sound like there’s not, you know to go somewhere else. Chapter 7 Bankruptcy lawyers tend to use the stress associated with debt collectors to get their clients sold on the idea of filing for a chapter 7 bankruptcy.
By Emily Thomas
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