The term Chapter 7 bankruptcy is a term that is thrown about a great deal in the media, but clear and concise explanations of the term are usually not offered. Because of this, there is some confusion as to what exactly chapter 7 bankruptcy actually is and this sometimes leads to people making critical errors when filing!

Having to go through the proceedings necessary in bankruptcy is the last thing people want to do. However if their debts add up to more than what they have coming in sometimes this is unavoidable.

Numerous kinds of bankruptcy proceeding exist including but not limited to chapter 11 and chapter 7. In this article our focus is going to be on chapter 7 since this is more for individuals.

Chapter 7 bankruptcy explained

According to the law and the United States court system, Chapter 7 bankruptcy refers to liquidation of assets that are not legally exempt from liquidation in order to pay off creditors and debtors.

Chapter 7 is an option open to individuals, businesses, partnerships and corporations. There is, however, a special clause open to the individual within the framework of this chapter filing that is not available to the other entities.

That special clause is known as a “discharge.” What a discharge refers to is the freeing of the individual from certain debts.

How to get started filing chapter 7 bankruptcy

If you need to file for chapter 7 bankruptcy some of the things you will need are the following: proof of your full income as well as expenditures, proof of your existing liabilities and assets, statements for your financial affairs, copies of any expired executive contracts, and of course copies all your tax returns.

For the public there are a series of additional items that are necessary. They will include but are not necessarily limited to the following: copies of your reports for credit counseling as well as any payment plan programs, statements of income/employee payments and in the case of being a student, copies of documents stating interest payments on one’s student loans.

If you are in a situation where filing chapter 7 bankruptcy or any other bankruptcy type is a necessity, make sure you take a visit to the US courts website. Also make sure that if you do need to take action in the way of a bankruptcy proceeding you get a good professional lawyer to deal with your case.

Bankruptcy is usually the very last option for people who are in debt up to their ears and can’t find any other way of getting out of debt. Most people are justifiably scared of filing for bankruptcy. There are a few things that should be kept in mind, and a few questions you should find answers for when you look at the implications of filing for bankruptcy. Some of the common fears are justified, while others are just myths.

The first fear people have is the question of credit. Can you get credit after you file for bankruptcy? The answer is yes, as long as you are willing to make some compromises. The credit limit might not be what you are used to, but you will still get credit. The main problem you will have to face here is that you will have to pay more interest than usual. However, the fact remains that there will be lenders who will offer you credit.

Another fear people have is mortgage and home ownership. You might wonder if you can find a lender to give you a loan or approve your mortgage if you file bankruptcy. The answer, again, is yes, you can, but you might need to show a good track record of eighteen months to two years to get this. Contrary to popular belief, lenders do not steer completely clear of people who have ever filed for bankruptcy.

Yet another fear people have is whether their pension savings will be affected. Fact is that most pension plans make sure that when your estate is liquidated to repay your debts, your pension savings are not touched. This means that your pension plans need not be affected at all. The exception, however, is if there are taxes owed that are attached to your pension plan – if so, they will not be exempted.

In any case, the best advice is always to seek professional counsel. A dedicated financial advisor can let you know all the facts about bankruptcy, as well as its implications. Only then can you make the right decision for you.

After bankruptcy there are processes you can follow to help repair your credit back to its original state. This will not happen immediately, but over time you will see results. Make sure to follow the right steps to remove the negative entries left by the bankruptcy and get you back on the right path.

What can you do about a bankruptcy on your credit report?

Any debts that were discharged during bankruptcy will show up as either “Charge-off” or “BK Liq Reo.” The bankruptcy will itself appear under the public record section as a Chapter 7 or Chapter 13.

The best way to remove a bankruptcy from your credit file is to contest it with Experian, Transunion and Equifax directly. Find some mistake in the actual bankruptcy claim; you can usually discover mistakes since a human had to add the bankruptcy into your credit file.

Look closely on your credit report for any error the data clerk made when adding up all of the bankruptcy accounts. They often round the number to the next dollar amount and this is technically not the actual number. Therefore, you could challenge this and in a lot of situations the bankruptcy will be eradicated.

Often, bankruptcies are easier to extinguish than other listings on your credit file. This is because bankruptcy files hold a plethora of information, so the possibility of mistakes is extremely high as items are usually entered by busy or overworked court employees.

There is a difference when working with the government compared to other creditors. The government will take much longer to reply and therefore make it harder for the bureaus to come back with an answer to your claim. The government’s inability to move quickly can be a benefit to you.

This next step is important: send a demand for correction to all three bureaus, not to the court that filed the bankruptcy claim. The credit bureau will need to correct any of the incorrect information on the credit report in a specific amount of time or eliminate the information from the report. You should take advantage of this system.

A bankruptcy is not a death sentence for your credit, and often it is much simpler to resolve a bankruptcy record then a number of small miscellaneous accounts on your credit report. Examine your bankruptcy records completely, find a mistake, then file a demand to have it removed from your credit report, so that you can start building your credit again.