A Bankruptcy is a legal proceeding which is filed in the US Bankruptcy Court system that allows entities (people and corporations) to obtain a discharge of financial obligations of certain debts.
What is a Chapter 7 Bankruptcy case?
A Chapter 7 Bankruptcy case is one where the debtor (you) must cooperate with a Trustee of the court and comply with the provisions of the Code to receive a discharge. Under Chapter 7 of the Bankruptcy Code, a Trustee is appointed to sell or liquidate any of the debtor's "non-exempt" assets or property in order to raise cash to pay creditors.
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Chapter 7 Bankruptcy is a relatively quick process.Ninety to one hundred and twenty days, compared to a Chapter 13 Case which is usually over 5 years.
It is suggested you find a lawyer to complete the paperwork and do the filing for you. The lawyer will give you some "homework" to do which involves creating a paperwork file of all of your monetary events. Things such as bank statements, credit card statements, several years of tax filings and most anything dealing with money and your life. It is actually a good time to get organized so that you do not get yourself into this kind of trouble again.
You then have a meeting with your lawyer, present all your homework and then they will go over it to make sure every t is crossed and i dotted. After that the lawyer will file with the US Bankruptcy court for you. In out 30 to 45 days, you will get a case number and a hearing date. It is at this time your creditors have the capability to put their claim in on what can be raised and liquidated by the trustee. If they do not claim anything, too bad. If there is not enough to cover their claim, too bad.
In about another 45 days, everything is discharged and you are released from those current debts. Done.
Now why doesn't everyone do this? There are a lot of reasons. Not everyone will qualify for a Chapter 7 and may end up filing for a Chapter 13 Bankruptcy. Leave the Chapter 11 to the big corporations. Here is a list of consequences (not inclusive of everything) of filing Bankruptcy:
Loss of Property Impact on Credit History Availability of Future Credit Impact on reputation Impact on Employment Impact on housing and mortgages Impact on the availability of utilities and other services Impact on future financial options
I will address these factors and Chapter 13 bankruptcy in future articles.
Are there alternatives to bankruptcy, yes several. Here is a partial list of some alternatives:
Repayment Plan - Arranged by you with your creditors Debt Solver Plan - Arranged by a company and your creditors Negotiated Settlement - lump-sum payment to each creditor arranged by you Debt Consolidation Loan Home Equity or Refinance loan Increase Your Income
Please, however be careful of credit "repair" organization, a lot of them just repair your credit report and do not actually work with dealing with your creditors in negotiating a viable solution. Really be careful of the "Payday" loans companies. I have seen their intrests rate work out to over 300% on a compounded yearly basis. And of course, what has gotten into all this mess, do not go for a "sub-prime" loan. it will cost you in the end.
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