What is a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is also known as a “complete” or “liquidation” bankruptcy. It is over within 4-6 months and gets rid of unsecured debts like credit cards, medical bills or lines of credit. Chapter 7 does not require you to make any further payments to your creditors. Chapter 7 bankruptcy also stops any wage garnishments and sometimes allows you to get back part of the money that has been taken.
Will I lose everything if I file for Chapter 7?
Each state has what’s called “exemptions” that allow a debtor to keep a certain amount of property. The goal of the exemptions is so that once a bankruptcy case is over, the debtor and their family are not left on the street with nothing. States allow debtors to keep a certain amount of equity in a house, cars, jewelry, clothing, and other assets. Generally, no one files a Chapter 7 case if they will lose anything. If a debtor has too many assets to file a Chapter 7 case, they may file a Chapter 13 bankruptcy case that allows debtors to keep more property.
How will this affect my credit?
A bankruptcy is on a person’s credit report for 7-10 years after the date of filing. However, bankruptcy is very common and if creditors didn’t extend credit offers to everyone that filed for bankruptcy, the creditors would not make any money. Generally, after a Chapter 7 case is over, it is possible for debtors to qualify for a house mortgage within 2 years if that is their goal. Ask your attorney how to raise your credit score as quickly as possible after a bankruptcy case is over.
What would happen if I don’t file for bankruptcy?
If you don’t file for bankruptcy, you risk being sued by your creditors, having your wages garnished, your tax refunds taken, your car repossessed or even your house being sold. Bankruptcy immediately stops any of these actions from being taken and in some cases can even retrieve vehicles or money that has been taken from you.
Are there any alternatives to bankruptcy?
There are many “alternatives” to bankruptcy that are advertised, such as debt consolidation, debt settlement, and credit counseling. The reality is that many of these companies are scams and even if they are legitimate, have very low success rates. Many people try these options, only to lose more money and time than just filing a bankruptcy case in the first place. If you are considering using one of these companies, it’s always a good idea to do an internet Google search with the name of the company and the word “scam” to see what pops up. Also check with the Better Business Bureau for any complaints. These companies also neglect to tell you that they offer no real legal protection from creditors and often most of them don’t even have any actual attorneys on staff.
Join the Conversation