Chapter 7 bankruptcy is probably the most common type of bankruptcy that consumers file. Basically what this type of filing means is that your debts are discharged and you are not financially responsible for repayment. A bankruptcy judge in federal bankruptcy court will look at your debts and income ratio and figure in what assets you have and decide if you are able to pay your debts or not. Basically by the time you are in court you have already consulted a qualified chapter 7 attorney who would not advise you to file if there were any options to pay off your debt. Once the bankruptcy is discharged your credit slate is wiped clean but of course the stigma of the bankruptcy will remain on your credit score for seven years which can make it difficult to get loans or even rent or get a job. To combat this catch 22, some states have banned credit checks for employment purposes so your bankruptcy can no longer keep you from being hired unless your credit is relevant to the job such as a bank teller job.
If you're considering filing chapter 7, you should be aware that not all of your debts may be dischargeable, and a chapter 7 lawyer can help you here. The bad news is that child support, alimony, back taxes and those pesky student loans are all debts that will follow you forever until you repay them. The good news- other types of debt such as unsecured loans through lending companies, secured loans such as car loans or home loans are dischargeable. Of course this doesn't mean you will get to keep the property of a discharged loan. If you're including your house and car in debts to be discharged off the chances are pretty good the bank has already foreclosed or reposed their collateral or is about to do so. Anything you own outright of value can be seized and sold to pay off your debts in a bankruptcy but of course the courts wont strip you of everything and the rules of what can and can not be taken is extensive. This is where it is vital to have the services of a bankruptcy attorney to walk you through the process so you will know what to expect.
When you file your bankruptcy paperwork it will include a list of your debts to be discharged, your assets and proof of your income. Tighter filing rules have also made it mandatory to undergo credit counseling, which you will need to show proof that you did within the 180 day time window before your can file.
The good news is filing for bankruptcy will put a freeze on all collection efforts including the ability of a home lender to foreclose on your home so you will have a little additional time to get on your feet while everything is at a stand still. And once your discharge becomes finalized you can have a fresh start to start over without all of that debt and added stress hanging over your head.
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