While bankruptcy sometimes has a negative connotation, it can actually be a great source of relief for people in severe debt since filing for it triggers an automatic stay and prevents creditors from taking action and harassing you. Read on to learn more about Chapter 7 bankruptcy and how it can help.
What is it, and how does it work?
There are six chapters of bankruptcy in the U.S. Which one you file for will depend on your assets, whether you are filing as an individual or as a business, whether you have debts in other countries, and so on. Chapter 7 bankruptcy, or liquidation bankruptcy, is arguably the most commonly used type. When you file Chapter 7, assets and properties are liquidated and distributed to pay off your creditors.
What are the benefits?
You get a "fresh start," so to speak. Once the debt is discharged, there is no repayment plan and you get to keep your future earnings. In fact, you may be able to discharge all your debt within a few months, compared to other chapters which may take longer.
Will you lose everything?
No; your assets will be divided into exempt and non-exempt property. Exempt property are things you are allowed to keep, such as
household goods and furnishings
a portion of home equity
The idea is that you should be able to keep belongings that are necessities so that you can still live and earn a living wage. If you lost your car, for instance, then it would be harder for you to get to work, earn money, and pay back creditors.
Items that you may have to give up include things like:
valuable musical instruments
cash, stocks, bonds, and other investments
secondary properties (e.g., vacation home)
collections of value (e.g., gold coin collection)
A bankruptcy attorney can help you sort through your assets so that creditors aren't taking away belongings that you truly need.
How Else Can a Bankruptcy Attorney Help in this Process?
Although you could file for Chapter 7 yourself, a bankruptcy attorney can be a valuable ally and act as a mediator between you and your creditors so that you aren't harassed. For instance, they can make sure that as soon as your petition for Chapter 7 goes through, all collection agencies stop demanding payments. Some creditors may try to garnish wages or even initiate lawsuits, so your attorney can help to defend you against these actions. Because Chapter 7 cases can be more complex (especially if you own a business or have a lot of assets to distribute), some creditors could claims against you for fraud if items aren't being distributed carefully.
A lawyer can help you navigate these complexities so that you don't get in trouble and so that your case isn't dismissed. Your lawyer can help you set up a repayment plan and file the proper bankruptcy motions and paperwork with the courts.
Reach out to a lawyer today for more information.