Both individuals and businesses are allowed to file for Chapter 7 bankruptcy. These proceedings typically last between three and six months. To be eligible for Chapter 7, you cannot make enough money (minus certain expenses and monthly debt payments) to be able to fund a Chapter 13 bankruptcy repayment plan. Credit card debt, unsecured loans, and other debts can be forgiven in Chapter 7 proceedings, however, child support, back taxes and alimony payments cannot.
Debts are categorized as secured debts (those that are guaranteed by collateral) and unsecured debts (such as credit cards, medical bills, personal loans, lawsuit judgments, repossession, deficiency claims, and wage garnishments). During the proceedings, some of your property may be seized and sold to pay off some or all of your debts. As a benefit of this type of proceeding, any unsecured debts will be wiped out. Things such as the furniture in your home, your car and your clothes are exempt from this seizure.
Secured debts are treated differently than unsecured debts in a Chapter 7 bankruptcy proceeding. In this case you (the debtor) have to make a choice between allowing the creditor to repossess the property that secures the debt, continuing to make payments on your debt to the creditor, or paying the creditor a sum equal to the replacement value of the property that secures the debt. In addition, some types of secured debts can be wiped out during a Chapter 7 bankruptcy proceeding.
Filing of Bankruptcy stops creditors from pursuing legal action including foreclosure. Property where you owe more than the value can assist in that the deficiency can be discharged.
In the vast majority of Chapter 7 cases, clients are able to not only eliminate debt, but also make use of state and federal exemptions available to protect assets the debtor wants to keep. This can give the debtor fresh financial start by wiping out all your unsecured debt
You can keep your home and car and you don’t have to lose everything – exemptions are available (and generous).