Filing for Chapter 7 Bankruptcy
If you are considering filing for chapter 7 bankruptcy, there are a few important questions you may ask yourself. Do I qualify for chapter 7 relief? How would this filing affect my home or other personal property? Is filing chapter 7 going to affect my credit, now or in the future?
A debtor that files Chapter 7 may be an individual, partnership, corporation or other business entity. However, it is important to check with a bankruptcy attorney, as a Chapter 7 discharge is available to individual debtors, not to partnerships or corporations. A chapter 7 filing for a business is designed to liquidate company assets and pay its obligations.
The purpose of filing for a Chapter 7 would be to give an individual a fresh start, as the debtor would have no liability for most debts, once they are discharged. However, there are some debts that are not dischargeable in Chapter 7. Certain taxes, debts for alimony and child support and student loan debt, among others, may not be able to be discharged in Chapter 7.
An important note is that any filing under Chapter 7 may result in some property loss. Yet, the debtor may be able to file a schedule in Chapter 7 that would exempt some personal property. A bankruptcy attorney in your state can assist in helping the debtor to retain important property and to receive a discharge that covers most of the debtor’s allowed debts.
In a chapter 7 filing, the debtor will need to provide a listing of creditors, personal property and a listing of all monthly expenses. Additionally, the debtor releases all creditor’s names and addresses to his/her attorney. Then the bankruptcy court would give notice of the bankruptcy filing to these creditors. Typically, there is an ‘automatic stay’ that stops most collection action against the debtor or the debtor’s property. Under this automatic stay, creditors typically cannot initiate or continue a lawsuit, garnish wages, or make phone calls that request payment to the creditor.
Filing for Chapter 7 bankruptcy can affect your credit, and can stay on your credit report for up to 10 years. However, not filing when is necessary, may cause negative marks as well on your credit report, due to late or missed payments to your creditors. In Chapter 7, you will also lose your credit cards, but you can get new lines of credit within one to three years of filing for bankruptcy, but sometimes with a higher interest rate. So, it is important to decide what is best for your situation.
However, if you file now for Chapter 7, and you have a certain amount of disposable income, the bankruptcy court can convert your case to a Chapter 13, where you pay back debts over several years. This action may improve your financial situation as you are paying off some debts and converting could be more favorable to your credit. Check with a bankruptcy attorney in your area for more details on filing for Chapter 7.