Bankruptcy Chapter 7: Is It Right For You?

2007-03-08 10:33:40

( Legal )



Filing a chapter 7 bankruptcy is basically giving a person with unmanageable debt a fresh start in terms of his financial life. This bankruptcy chapter is the most common type of bankruptcy filing. Chapter 7 bankruptcy is also known as liquidation or straight bankruptcy.

If you file bankruptcy chapter 7, all your assets will be converted into cash. A trustee is appointed to oversee the management of your debts. A trustee will collect all non-exempt property and sell them. The proceeds from the sales will then be forwarded to your creditors. Filing bankruptcy under chapter 7 does not necessarily mean you will lose all of your assets. There are exemptions to these proceedings depending on the state you live in.

Some states allow you to keep some of your property. This means you can continue to pay for your car loan or your mortgage. You can do this by signing a reaffirmation agreement. Simply put, this agreement excludes a particular loan from your bankruptcy filing. Another way for you to keep your vehicle or your home is to pay your creditors in full. This releases you from the creditor's liens.

Bankruptcy chapter 7 also protects you from further demands from your creditors. Once you file for bankruptcy under chapter 7, your creditors will be temporarily prohibited from taking any of your properties.

Bankruptcy chapter 7 may not be right for you if you are paying child support or alimony or if you are still paying off your student loans. You may also file bankruptcy under chapter 7 if you do not have income tax debt and if your income is less than the state’s median income.

It is a good idea to find a bankruptcy lawyer that you trust. You can start by asking for referrals from your friends and family. You should also check any local legal associations available in your area.


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