Understanding Chapter 7

Chapter 7 Bankruptcy is one of the ways that individual consumers seek relief from their obligations to pay back debts. A chapter 7 provides a fresh financial start. While the laws governing Chapter 7 Bankruptcy changed in 2005, Chapter 7 Bankruptcy remains an excellent way for individuals to eliminate most, if not all, of their debt. In short, Chapter 7 Bankruptcy is a process in which you eliminate your legal obligations to pay back most types of unsecured debt when you do not have the means to pay your creditors back.

If you successfully complete a Chapter 7 Bankruptcy, most types of your unsecured debts can be eliminated, or discharged. An unsecured debt is a debt not attached to a piece property. The most common types of unsecured debts are credit cards, medical bills, personal loans, personal signature loans, utilities and payday loans. All of those types of debts can be eliminated in a Chapter 7 Bankruptcy. Even those debts that are subject to lawsuits and judgments can be discharged. Some debts in a Chapter 7 Bankruptcy will not be discharged. For instance, student loans, debts obtained by fraud, child support, court-ordered restitution, recent taxes, and most tickets and fines will not be eliminated. Also, debts on large secured property, such as car loans and mortgages, you wish to keep will not be discharged. However, if you no longer want to keep paying on a car loan or mortgage and you are willing to surrender the property the debt can be discharged.

Upon the filing of a Chapter 7 bankruptcy, all creditors, even those whose debts will not be discharged, most stop trying to collect their debt from you directly. This court order that goes into effect immediately upon the filing is known as the “automatic stay.” The filing of a Chapter 7 bankruptcy has the power to stop all types of direct collection action by creditors including garnishments, seizure of assets, lawsuits and harassing phone calls. While the bankruptcy is pending, typically four to five months, your creditors cannot contact you directly or collect from you. If you successfully complete a Chapter 7 bankruptcy, the collection efforts of debt that was discharged cannot resume. However, debt on a home or a car you want to keep, and non-dischargeable debt can resume.

Although the requirements of who can and cannot file a Chapter 7 Bankruptcy changed in 2005, most people who could file a Chapter 7 Bankruptcy before 2005 can still do so. Currently, if you have not filed for Chapter 7 Bankruptcy in the previous eight years or a Chapter 13 Bankruptcy in previous, if you spend more money each month than you make, if you earn less than the average household size in your state and you no assets worth liquidating. Some of the eligibility requires for a Chapter 7 Bankruptcy may vary from state to state, and even county to country.

So it is critical to contact a Legal Helpers attorney to see if you qualify for Chapter 7 Bankruptcy, and if a Chapter 7 Bankruptcy is the right choice to address your financial needs.

Benefits from filing Chapter 7 vs Chapter 13