Filing for chapter 7 is nothing to be ashamed of. Although it’s better to not get into debt in the first place, and while your creditors may not like it, filing for bankruptcy is the best way to relieve yourself of debts you have no hope of ever repaying. Once you have filed, your creditors, by law, must stop calling or trying to collect money from you in any way. When you file for bankruptcy, you are allowed to keep some of your assets, depending on the state in which you live. Assets such as real estate, cars, and electronics that are not exempt by the state will become the property of your bankruptcy trustee.
There are many reasons people file for chapter 7. The most common reason is simply overwhelming debt. Unemployment is one reason many people file for bankruptcy. If you have amassed too much debt to handle and you do not have a job to help you deal with it, filing for bankruptcy is one of your only options. Many people file for bankruptcy because they have medical expenses that they cannot pay off. Sometimes a divorce or other costly legal expenses lead people to file for chapter 7.
Filing for bankruptcy is a long and involved process and should usually be done with the assistance of a lawyer. There are two ways to become bankrupt. You can either file a petition for bankruptcy yourself or, in rare cases, a creditor can request that a court order you to file for bankruptcy.
The first step to filing for bankruptcy is to file your bankruptcy request with the court. Once the request has been filed with the court, a temporary order will go out to all of your creditors to stop garnishing your wages, pursuing legal actions, or trying to collect on their debt in any way. If the court has approved your application for bankruptcy and all your creditors have been notified, then a meeting is arranged in court between you and your creditors.
Although your creditors may or may not attend the meeting, you are required to answer, under oath, questions about your assets, your debts, your credit, and your available insurance. This meeting is presided over by your bankruptcy trustee who will also liquidate all your non-exempt assets. The purpose of this meeting is to establish that you have notified the court of all of your assets and debts and that you understand the implications of filing for bankruptcy. If your creditors attend the meeting, they are also allowed to ask questions of you. Once you have gone through the proper procedure, your bankruptcy trustee then sells your non-exempt assets in order to pay off your creditors. Finally, once your assets have been liquidated, the creditors write off all your debts.
Although filing for chapter 7 can be difficult, it does not mean that your life is over. People who file for bankruptcy are usually allowed to establish credit again, keep any jobs they had before the proceedings, and even file for chapter 7 again.
By Alex Turman