What is Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy is sometimes called a liquidation. If the Debtor has non-exempt assets, they must be turned over to the Bankruptcy trustee who then converts it to cash for distribution to the creditors. The Debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the Debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start".

One of the main purposes of Bankruptcy Law is to give a person who is hopelessly burdened with debt, a fresh start by wiping out his or her debts.

Will My Creditors Stop Harassing Me?

Bankruptcy filings will immediately stop all collection lawsuits, collection phone calls and letters. It will also stop collectors from contacting family, friends and employers. By law, all actions against a Debtor must cease once the documents are filed. Creditors cannot initiate or continue any foreclosures, other lawsuits or wage garnishees, or the telephone calls demanding payments. Secured creditors such as banks holding (for example) a lien on a car may get the stay lifted if you cannot make payments.

Will My Spouse Be Affected?

Your wife or husband will not be affected by your Bankruptcy if they are not responsible for any of your debt (did not sign an agreement or contract). If they have a supplemental card they are probably responsible for that debt.

What Are The Most Common Reasons For A Chapter 7 Bankruptcy?

The most common reasons for filing Bankruptcy are:

1. Unemployment
2. Medical Expenses
3. Marital Problems
4. Overextended Credit
5. Large, Unexpected Expenses

Who will Know?

Bankruptcy filings are public records. However, under normal circumstances, few, if any, will know you went bankrupt. The Credit Bureaus will record your Bankruptcy and it will remain on your record for up to 10 years.

I Was Bankrupt Before, When Can I File Again?

A person can file a new Chapter 7 Bankruptcy again if it has been more than 8 years since he or she filed the previous Chapter 7 Bankruptcy. A Chapter 13 can be filed sooner.

When Will I Be Discharged From Bankruptcy?

The major purposes of Bankruptcy is to afford the opportunity to a person hopelessly burdened with debt to erase his or her debt and thereby get a fresh financial start. A bankrupt's debt is erased when he or she is discharged. The Debtor is discharged 4-6 months after Bankruptcy is filed. At that time all debts (with some exception) are written off.

Will I Ever Get Credit Again?

Yes! A number of banks now offer "secured" credit cards where a Debtor puts up a certain amount of money (as little as $200.00) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the Debtor proves his or her ability to pay the debt. As little as two years after Bankruptcy discharge, Debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed Bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed Bankruptcy in the past. While the fact you filed Bankruptcy stays on your credit report for 10 years. It becomes less significant the further in the past the Bankruptcy is. The truth is that you are probably a better credit risk after Bankruptcy than before.