Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a federal law that allows you to eliminate debt, keep what you own and continue paying debt you want to keep  (such as home and car loans). You do not have to make any more payments on unsecured debt (such as credit card and medical debt). This makes it possible to focus on your most important debts and to pay other debts you may not be able to bankrupt (such as most student loans and tax debt).

 

The Power of Chapter 7 Bankruptcy: Getting Rid of Debt and Keeping What’s Important

Chapter 7 bankruptcy protects you, your income and your possessions from creditors in four important ways:

  • Automatic Stay: The automatic stay immediately stops your creditors from contacting you and puts a stop to creditor phone calls, harassment, lawsuits, wage garnishments, bank levies, judgments and judgment liens.
  • State and Federal Exemptions laws: These laws allow you to keep your most important assets— your home, cars, furniture, bank accounts and other important property. Most Chapter 7 cases are what is called “No Asset” cases. This does not mean that you don’t own anything. It means that what you own is protected and cannot be taken away from you by your creditors or the bankruptcy trustee. That is what makes it possible for you to file bankruptcy and not give up the things you want to keep.
  • Discharge: The Chapter 7 discharge is the court order which permanently wipes out your unsecured debt. No creditor can ever again bother you or try in any way to collect the debt from you. They cannot call or write you. They cannot call your family, friends, or place of work. They cannot say you owe the debt anymore on your credit report. They cannot sue you. They cannot enforce any judgments they might already have. They cannot garnish your wages. They cannot levy your bank accounts. You no longer owe the debt.

 

In short, the Chapter 7 Discharge of your debt is the beginning of the Fresh Start which is the purpose and goal of our federal bankruptcy law.

  • Reaffirmation of Car and Home Loans: Many people worry that filing for bankruptcy means they will lose important things that they have bought on credit like their home, cars, furniture, appliances, or jewelry. You do not have to give these items up.  Chapter 7 allows you to tell these secured creditors that you want to keep those items and that you will agree to continue owing and paying for them after your bankruptcy is done.

This is a common process and is done in many Chapter 7 bankruptcies. There are two steps: (1) you file a Statement of Intention which tells the creditor that you want to keep the item, and (2) you sign a Reaffirmation Agreement in which you agree that you will still owe and pay the debt after your Discharge.

Guidance from a bankruptcy lawyer can help you determine how to get rid of the debt you cannot afford to pay and keep paying for the things that matter most to you.
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