Why Should I Consider Chapter 7?


We all hit hard times. No one is exempt from the effects of unemployment, illness, business failure, divorce or other calamities that cause people to get behind on paying their debts.

Sometimes it is impossible to pick yourself back up after these hard times without a little assistance. For these and other reasons, many individuals facing insurmountable debt seek the assistance of bankruptcy.

The negative stigma that gets associated with filing bankruptcy is unfair, as it is often the only solution some people may have to get through a difficult financial situation.

What is Chapter 7 Bankruptcy?

Out of the two types of bankruptcy, Chapter 7 is the most popular consumer bankruptcy options. It is also known as liquidation bankruptcy. This type of bankruptcy eliminates most or all of your debt obligations and allows you to get a financial “fresh start.”

How Does It Work?

When a Chapter 7 case is filed, the Court will appoint a Trustee. The Trustee is responsible for ensuring that all debts are accounted for and that all assets have been disclosed.

Not all debts are equal. Some are given first priority in terms of payment and others are paid from whatever is left over from assets you may have available. The bankruptcy Trustee might sell some of your property to pay your unsecured creditors.

However, most of the property owned by most people is “exempt” or protected for you by law. So do not be alarmed by thinking you will lose everything you own. You won’t. The vast majority of people rarely lose any of their assets.

And some debts are not dischargeable, such as child support and student loans. If a certain asset is not involved in the bankruptcy process, such as your home, you do continue making payments towards this debt.

Keep in mind, though, that the secured debt survives the discharge and the filer will be required to continue making the mortgage payments.

Consult with an Attorney

It is always recommended you work under the guidance of a bankruptcy attorney. This process is complex and it is vitally important that everything is done according to the law.

Prior to filing for bankruptcy, sit down with an attorney who is experienced in bankruptcy and discuss how filing will affect your assets. Your attorney will also be able to explain to you how your debts will be handled, what the process is like and which form of bankruptcy, whether Chapter 7 or Chapter 13, is best for you.

What Happens after Chapter 7 is Filed?

Once your attorney has filed your Chapter 7 bankruptcy case, an automatic stay (“injunction”) goes into effect. The automatic stay keeps your creditors from taking any further actions to collect from you.

The Trustee will hold a “Meeting of the Creditors” to ask you about your assets and financial situation. Certain debts may be reaffirmed, such as secured debts for your car or house.

These reaffirmed debts will be excluded from the discharge and you are expected to continue paying for those assets. The reaffirmed debts, when paid timely, will help to restore a higher credit score.

Closing the Case

Once the Trustee has liquidated any non-exempt assets and discharged the unsecured debts, the case will be closed. No creditors will be able to attempt to collect any debt from you.

Limitations to Filing Chapter 7

Like anything, filing Chapter 7 bankruptcy can have its unfavorable aspects, as well as positive. One adverse outcome involves the affect bankruptcy may have on your ability to make major purchases in the near future.

Your Chapter 7 bankruptcy can remain on your credit report for up to ten years. If you intend to purchase a home within that time period, you could experience some delays or roadblocks in the mortgage process. It is not impossible to obtain a new mortgage, as some lenders will assist home buyers who have this very problem.

A bankruptcy filing also could appear more favorable on your record than multiple missed debt payments, default judgments, repossessions and collections lawsuits.

The Chapter 7 bankruptcy process also will result in the closing of your credit cards. If you relied upon them for the purchase of every day necessities, this could be a problem for you. Within a few years when your financial stability has been restored, you could even be eligible to apply for new credit cards.

Contact An Arlington Bankruptcy Attorney For A Free Consultation Today

An experienced Texas bankruptcy lawyer can help you apply bankruptcy exemptions in the best way possible and can help address any concerns you have about the bankruptcy process.

Call the Law Office of Marilyn D. Garner today at 817.381.9292 for a free consultation to discuss how bankruptcy may help you realize financial freedom.

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