What is Chapter 7 Bankruptcy? Important Information to Know
The question of what is Chapter 7 bankruptcy is one that many Americans are finding themselves having to ask today. In the culture of spend first and pay later, as promoted by credit card companies, you are likely to find yourself in debt. When you encounter financial difficulties and are unable to pay your debts, Chapter 7 bankruptcy may be the best option for you.
It is called Chapter 7 because it is found in the 7th chapter of the bankruptcy code. Under Chapter 7, a bankruptcy trustee would ensure that your non-exempt assets are not only sold but also fairly distributed among creditors. This is accomplished in accordance with the code that outlines the priorities and order of such a transaction.
In your search for information concerning what is a bankruptcy Chapter 7, you will see that many people who have used it consider it the easiest and the most straightforward way of getting out from under debt. This option is available to partnerships, individuals, married couples and corporations.
Filing for bankruptcy has its pros and cons. By understanding and weighing the advantages and disadvantages, you will be in a better position to fully understand and answer the question of what is a Chapter 7 bankruptcy filing, so that you can make an informed decision.
Pros of Chapter 7 Bankruptcy
- Freedom from debt – Being declared bankrupt is bad enough and it can only get worse if the case becomes a prolonged process that consumes your time. Thankfully, the bankruptcy process only takes between 3 and 6 months. After it is done, you can enjoy peace of mind as you do not have to deal with creditors anymore and you can start all over again, without looking back over your shoulder.
- Retain some mortgage in your home – Various states create exemptions for certain types of property once you are declared bankrupt. If you file for Chapter 7, a number of your properties will be shielded from bankruptcy. In addition, you will be allowed to keep your savings and salaries as well as any additional property that you buy afterwards.
- Get new credit lines – Once you file for bankruptcy, you will be allowed to obtain new credit lines although they will be subject to higher interest rates. You can achieve this in one to three years after you file for bankruptcy. You will have the opportunity to rebuild your life without the desperation that can come from crushing financial debts.
Cons of Chapter 7 Bankruptcy
- You may find it hard to access credit – Being declared bankrupt is going to make future creditors wary of giving you credit lines. Remember, Chapter 7 bankruptcy is usually linked to your credit profile for no less than 10 years. Getting a mortgage becomes quite a tedious process once you have been declared bankrupt. While credit is available for people with bankruptcies, it comes at a higher price with increased interest rates.
- Credit cards – Upon filing for Chapter 7, all your credit cards are confiscated and you will have to pay a higher interest rate if you are able to obtain new ones. Waiting for new credit cards to be processed can take up to three years.
- You can only file once every six years – Once you have been declared bankrupt under Chapter 7, you cannot file for another one for six years from the date you filed for the first one. This can be problematic, especially in the event that you encounter a financial crisis within that period. Note also that filing for bankruptcy under Chapter 7 does not mean you can evade paying child support, alimony and student loans.
What you Need to Know Before Filing Under Chapter 7
What is filing bankruptcy Chapter 7? This is where a bankruptcy trustee will cancel all or some of your debts. It is considered better, where applicable, than Chapter 13. While you may not be left with much after your debts are settled, at least getting your creditors off your back will allow you to have enough space to start all over again at your own pace and rebuild your financial standing once again.
- You need a bankruptcy lawyer so that he/she can help with the paperwork. In addition, being declared bankrupt does not mean that you will be exempted from making important payments like alimony and child support.
- Although many bankruptcy blogs will tell you that you can file for bankruptcy alone, it is very hard and extremely complicated. You need a lawyer to explain the nitty-gritty details of the entire process and to guide you through every step of the way.
- Did you give away any property in the last two years? What is your income today and how much do your expenses amount to monthly?
- Do you have any exempt property, that is, property that you are allowed to keep according to the law? How much money did you spend in the past two years? You will need to answer these questions and more.
Hopefully, you have found the answers you were looking for regarding the question of what is filing bankruptcy Chapter 7.
My name is Craig R. Chlarson. Whether you are seeking to eliminate your debt, typically through a chapter 7 filing, or whether you are seeking to reorganize your debt, typically through a chapter 13 filing, or even if you have basic bankruptcy questions, call me today. I can help you.
To schedule an appointment, call (435) 901-3449
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