What Happens With a Chapter 7 Bankruptcy?
When you file a chapter 7 bankruptcy, you are asking the creditors and the court to forgive all of your debt. The only downfall to filing this type of bankruptcy is that you will undoubtedly have to surrender all your assets to the trustee for a sale. Any monies made from the sale will be distributed to the creditors starting with the secured debts and then the unsecured debts. The trustee does receive a portion of the money as pay for doing the work. You cannot hide any assets when filing for bankruptcy. For instance, a home, car or any other luxury item can be sold at a sale.
The creditors do have the option of denying a discharge of the debt. If this happens, you will be liable for the debt until it is paid in full. A debt that is not discharged will stay with you until you pay it, you cannot file bankruptcy on that debt in future years. Once all your debts are discharged and forgiven, the chapter 7 bankruptcies will stay on your credit record for seven to ten years as a discharge, where a chapter 13 shows that you did pay some of the debt.
Chapter 7 bankruptcy has become harder for people to do since the new bankruptcy laws were passed. If you have a monthly income and any tangible assets, you might not be able to file a chapter 7. A lawyer will tell you what you qualify for and what it will mean to you. If you have enough income to pay a monthly payment on your debt, a lawyer will advise you to file a chapter 13. If you do file a chapter 7 bankruptcy, you will be responsible for lawyer fees and any debts that are not discharged.
There are ways to keep a home when filing a chapter 7 bankruptcy, but the mortgage payment must be up to date and have little equity in the home. This is done that same way except the home becomes protected because there is a mortgage holder. As long as you pay the monthly payments and the property taxes, you can keep the home even if you file a chapter 7 bankruptcy. There are many laws governing a chapter 7 and that is why a lawyer should represent you when filing any bankruptcy. You do not have to lose everything when you file a chapter 7.
When you file chapter 7 bankruptcies, the trustee and creditors will sit down with you and determine if you should have your debts forgiven or if you should be held responsible. If you income is minimal, most creditors will offer the discharge. Some debts cannot be filed under a bankruptcy such as tax warrants, fines and some lawsuits that result from a car accident or other criminal acts. Many people do not know this and become upset when they realize they will still have to pay for these debts. You should always talk with a lawyer so you understand the laws.