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 an official, legal declaration of a debtor’s inability to pay off large amounts of debt. There are two kinds of bankruptcy available to debtors in the United States – Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 bankruptcy is the most common kind of bankruptcy in the United States. The best benefit of Chapter 7 bankruptcy is that all dischargeable deaths are immediately wiped out — you don’t have to wait or pay off any remaining debts (at least the ones that are legally dischargable).

In Chapter 13 bankruptcy, the debtor will have a repayment plan so that they can pay off all their debts over a period of time. Some debts may be erased immediately, but this doesn’t always happen. One major advantage of Chapter 13 bankruptcy over Chapter 7 bankruptcy is that the debtor may be allowed to hold on to some assets which would have been otherwise liquidated under Chapter 7.

Don’t think chapter 13 bankruptcy is a complete easy street. However, here are a few examples of the kinds of debts which can only be cleared under Chapter 13 bankruptcy: – Debts from a divorce or settlement agreement – Court fees – Home Owners Association, condominium, or coop fees -Retirement plan loans – Non dischargeable tax debts – Debts from a previous bankruptcy.

Not all of your debts will be erased under either Chapter 13 or Chapter 7 bankruptcy. The following debts cannot be discharged under any kind of bankruptcy: – Alimony, child support, and other domestic support obligations – Student loans, except in extreme cases of “undue hardship” – Criminal penalties, and any debts you incurred as a result of committing fraud or other illegal or “malicious” acts.

Income tax debts can be discharged, but only under certain circumstances. The restrictions include, but are not limited to, that you filed a tax return for the year you owed the taxes, and the tax debt must be from a tax return filed at least two years before your bankruptcy filing.

Bankruptcy filings require that the debtor report all creditors and their addresses; debts which are not listed cannot be discharged. If the creditor has moved without providing a forwarding address, or the notice is lost in the mail or notice cannot be sent for any reason out of the debtor’s control, the debt will be wiped away as long as it is legally dischargeable. However, debts which cannot be assessed for reasons which are under the debtor’s control (e.g. the debt is not listed or the address given is incorrect) may not be discharged.

Filing bankruptcy doesn’t mean that your financial life is over. You may still have liens on your house, but at least now no one will be able to garnish your wages or access your bank account. Do expect to have difficulty getting loans. Cash is going to be your best friend for the next few years.

While filing for bankruptcy can relieve one of the burdens of debt, a debtor must do his or her due diligence to make sure that all dischargeable debts are, in fact, discharged and to know which debts cannot be discharged. Though a person sometimes must file for bankruptcy because of medical bills or other forces beyond their control, remember that you control what becomes of your life after bankruptcy.

Some people consider whether or not they should file bankruptcy or just let their mortgage lender foreclose on them? However, it is not as simple as a case of either/or and a decision cannot be made this easily. The reason a foreclosure occurs is because a mortgage lender isn’t paid their monthly mortgage payments.

Stopping the action can only be done by paying the lender. Another type of loan, a car loan, will result in the loss of your car through repossession if you are not diligent in paying your loan. If a person does not make their mortgage payments, they face the loss of their home through foreclosure.

For someone who cannot pay his or her debts, bankruptcy is a legal action they can take. The purpose of this action is to stop all the civil action against the debtor while the debtor is in bankruptcy. As a result, the mortgage lender is incapable of immediately continuing their foreclosure, or any other legal action. Still, the mortgage lender will respond by filing for relief from the stay, and once they are granted relief, the proceedings will continue. When it comes down to it, filing for bankruptcy will not prevent a foreclosure, nor will you be able to keep the home if you do not pay the mortgage lender. The best bankruptcy can do is slow down the process, but it cannot stop it entirely.

Even though it doesn’t stop foreclosure, bankruptcy can also be beneficial in that it will allow a person additional time to make payments, or make it easier to pay the lender. Because bankruptcy makes a lender suspend foreclosure, a debtor will have extra time to get the money to pay the lender. The debtor may also have have several of their other debts eliminated due to bankruptcy, so they are able to have additional money available to pay their mortgage. When filing a chapter 13 bankruptcy, a court mandated payment plan permits the debtor to spread out payments over a period of time, instead of forcing them to pay all at once.

However, not everyone qualifies for filing of bankruptcy in the first place, and those that do must pay sufficient legal fees. Legal bills can be quite high, and high enough that they outweigh the costs of catching up with the mortgage.

If you think that bankruptcy may help you stop or avoid foreclosure, talk with a licensed lawyer. Bankruptcy is a complicated legal process that should not be handled by yourself alone. The material offered in this article should serve only as a general guide, and for more specific information, you should contact a licensed lawyer in your state.