Helping You Understand Chapter 7 Bankruptcy
Bankruptcies can be called “reorganizations” or ‘liquidations”, depending on which type of bankruptcy you decide to do. Both a Chapter 7 bankruptcy and a Chapter 13 bankruptcy are federal court processes that are meant to assist businesses or consumers to get rid of their debt or to repay the debt with protection provided by the bankruptcy court.
A Chapter 7 bankruptcy is considered a “liquidation”. If you own property, it is sold (liquidated) and the profit is used to pay off as much of your debts as possible and leaving you with enough to start over.
Chapter 7 Bankruptcy
For individuals or businesses that are convinced there is no way to get themselves out of the debt they’ve gotten into, a liquidation bankruptcy (also called a Chapter 7), can be filed.
When you file Chapter 7 you will probably be required to sell some of your property (if you own any) in order to pay down some of your debt. When you do this, the Chapter 7 bankruptcy will then erase most (if not all) of your unsecured debts. Some property is considered exempt under the state and/or federal laws- meaning you probably will not have to sell your clothing, car or household furniture. If you don’t happen to own very much, your case may be considered a “no asset” case, and what property you do have will likely be considered exempt.
Recent changes to the bankruptcy law mean that any debtor wanting to file for a bankruptcy must first undergo credit counseling, budgeting and debt management counseling with approved counseling companies before debts will be removed. Individuals with higher income levels will not be permitted to file a Chapter 7 Bankruptcy and instead will be required to pay at least some of their debt under a chapter 7 bankruptcy.
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