You may know somebody who has filed for Chapter 7 bankruptcy. You may have even looked into this yourself. Even so, you never truly understand the finer details of this process until you are in the middle of a filing.
There are many details associated with bankruptcy, some of which can be difficult to understand. As complex as this may be, there is something to remember: many people successfully file every year. This means that you can do the same if you decide it would be in your best interest.
What You Need to Know
With Chapter 7 bankruptcy, the trustee cancels most or all of your debts. That said, this person also has the right to sell some of your property as a means of repaying creditors.
If you are comfortable with Chapter 7 bankruptcy, if you have come to the conclusion that you qualify to file, it is time to focus on the required forms. In addition to a petition, you are asked by the court to complete and file a number of other forms. These ask for information that describes:
- The property that you own.
- Your current income.
- Your current monthly living expenses.
- Your debts.
- Exempt property you are able to keep.
- Any property you owned over the past two years.
- Any money you spent during the past two years.
- Any property you sold or money you gave away over the past two years.
Should I stretch the truth? Many people think this is a good idea. They don’t believe that the bankruptcy court will find out if they are lying. This is a big mistake. When it comes to Chapter 7 bankruptcy, you always want to tell the truth. You may be tempted to lie, but this could come back to harm you in a big way.
The Automatic Stay
You cannot discuss Chapter 7 bankruptcy without learning more about the automatic stay. This is one of the primary reasons to file, as it gives you some “breathing room” and peace of mind.
Once the automatic stay is in place, creditors are required by law to stop all collection activity. This means you won’t have to deal with any annoying phone calls. The same holds true for mail correspondence. While the automatic stay does not last forever, you should be glad that this is something that works in your favor.
Tip: the automatic stay also means that creditors cannot garnish your wages or go after your car or home.
What Happens to Secured Debt?
If you have put up property against a loan, the collateral is known as secured debt. There are many forms of this, including homes and cars. If you are behind on payments, the creditor has the right to request that the automatic stay be lifted. This allows them to foreclosure or repossess the property. If you are current on your payments, however, you can keep the property and continue to make payments as you always have.
Once the Chapter 7 bankruptcy process comes to an end, the court discharges all of your debts. That being said, there are some exceptions:
- Debts that cannot be wiped clean via bankruptcy, such as tax debts, child support, alimony, and student loans.
- Debts that are nondischargeable because the creditor objected, such as if they feel the debt was incurred fraudulently.
Should you File?
Whether or not you file for Chapter 7 bankruptcy depends on a variety of factors.
- Do you qualify?
- Would you be more comfortable with Chapter 13 bankruptcy?
- Are you okay with the cost and timeframe?
- Are you okay with what this will do to your credit score?
- Have you considered all your alternatives, such as debt consolidation?
There is no simple way to decide if you should file for Chapter 7 bankruptcy. Some people realize this is their only way out of debt. Others find that they should put this off for the time being, realizing that another strategy could work better.
If you have any questions about Chapter 7 bankruptcy, if you are ready to move forward, don’t hesitate to contact us online or via phone at 410-324-2116. From there, we can answer your questions, help you decide if Chapter 7 is the right choice, and then guide you through the process.