Chapter 7

What is Chapter 7?
Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors.

Why would anyone file Chapter 7?
The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick “fresh start”.

What can I keep?
Property that the bankruptcy rules define as “exempt”. There are exemptions for each state as well as federal exemptions, and a good bankruptcy attorney can tell you which to choose.

What about secured creditors?
Secured creditors such as a bank holding a lien on a house or a car may be able to get the stay lifted for failure to make payments.

Is it possible to rebuild my credit?
Absolutely. If you are hit with a sudden, unexpected surge of expenses, it’s usually better to declare bankruptcy right away instead of using a “credit counselor” or waiting to see if you can get out of debt on your own.

Rebuilding your credit starts immediately after your bankruptcy discharge. You can start with a secured credit card. Two years after discharge, debtors are eligible for mortgage loans with terms comparable to those with a similar financial profile who have not filed bankruptcy.

The IRS has taken action against a number of non-profit credit counseling groups for abuse.

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