Chapter 7 Bankruptcy

Filing Chapter 7

Chapter 7 is the easiest and most sought after bankruptcy filling in the United States. Established under Title 11 – Bankruptcy Court, Chapter 7 enables debtors, such as distressed borrowers, to unload all their debts in exchange for a fresh start. Debtor’s assets are collected and liquidated to satisfy outstanding debts depending on rank, amount and priority. Both federal and state laws provide exemptions to protect life style of debtor.

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How Long Does Chapter 7 Take?

Usually, most Chapter 7 cases take anywhere from 3 month to 6 month before debt is discharged. Depending on the district of filing, certain debts will not be discharged, such as student loans and back owed taxes. Securities securing secured debts, such as real property in mortgage loans, will revert back to the original creditor. Unsecured debt, such as credit card purchases and medical bills, will be dropped unless creditors can demonstrate a pattern of ill intentions and evil doing. Previous judgments and child support payments can be discharged through Chapter 7 bankruptcy.

All discharged debts become invalid releasing debtor from liability of repayment. Creditors of discharged debts can’t pursue debtors for payment or collection. Very rarely, the court may grant an appeal to discharged credit holders. Chapter 7 filers will need to attend and be present at a number of court hearing including question sessions conducted by their creditors.

What Documents Are Required To File for Chapter 7 Bankruptcy?

If you are considering protection of a Chapter 7 bankruptcy procedure, you will need the following:

     Copies of the last two years Federal tax returns
     Copies of all your debts
     Copies of your paycheck stubs
     Certificate of Credit Counseling
     Copies of all financial records (such as checking accounts)
     Detailed list of monthly expenses
     List of assets

(In addition, the court can ask for more documents depending of each individual case)

How Will Chapter 7 Effect My Life?

The primary effect of any bankruptcy filing will be reflected on the debtor’s credit ratings. For the first three years after your case had been discharged, you will not be able to attain any new credit lines. Some creditors may grant you the right to maintain credit lines providing that you agree to continue holding liability for repayment. You can apply for secured credit lines to reestablish your credit rating. Federal laws prohibit your employer from terminating your employment because you had filed bankruptcy. You will enjoy more cash flow as you will not be liable for monthly payments on discharged credit lines.

After the lapse of the first three years, most bankruptcy filers – who maintained good credit decisions – notice that their credit ratings are back to normal levels. Some jobs, in the financial sector, can deny you employment based on your credit history. Such jobs act in authority given to them through federal laws to protect their overall product reputation.

Read more on the effects of bankruptcy on your life and your credit.