When you file for bankruptcy, you are given the change to rise out of a financial crisis with a clean slate. The Chapter 7 Bankruptcy Code is the quickest and easiest way to achieve these results. How does it differ from Chapter 13? What are the negative aspects to Chapter 7 Bankruptcy?
Under the Chapter 7 Bankruptcy Code all non-exempt property is sold and the proceeds are distributed to the creditors to pay off the debt. Most of the time, the borrower has little or no assets to liquidate, so the "cleansing period" takes place quickly.
This process is often referred to as "liquidation" or a "straight bankruptcy". With this type of bankruptcy, the borrower can start anew. In the process, most debts are discharged within months of filing the bankruptcy petition.
When an individual files Chapter 7 Bankruptcy, a trustee is appointed to administer all non-exempt property, sell what assets are available, and distribute the proceeds to the appropriate creditors. There are no payments made from the debtor to the creditors...a major difference from Chapter 13 Bankruptcy.
Under a Chapter 7 filing, the debtor receives a discharge on all debts that can be discharged, such as child support, most taxes, student loans, etc...One good thing is that the debtor is usually allowed to keep their primary residence and their car.
Whenever you have chosen bankruptcy as your best option, engage the services of a competent attorney who specializes in bankruptcy. Bankruptcy has clear, defined rules that must be adhered to. Once you have chosen your attorney, allow them to do their job and follow their advice...never be a micro manager. Delegate to your attorney...it is Empowering!
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