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Chapter 7

Bankruptcy is a powerful tool for debtors.

Chapter 7 Bankruptcy may wipe out most, if not all of your unsecured debt.  Generally credit cards, personal loans, signature loans, medical bills and deficiencys are classified as unsecured debts.

What Bankruptcy Can Do
If you are facing serious debt problems, bankruptcy may offer a powerful remedy. Here are some of the things filing for bankruptcy can do:

Wipe out credit card debt and other unsecured debts. Bankruptcy is very good at wiping out credit card debt. Unless you have a special “secured” credit card your credit card balance is an unsecured debt – that is, the creditor does not have a lien on any of your property and cannot repossess any items if you fail to pay the debt. This is precisely the kind of debt that bankruptcy is designed to eliminate. Besides credit card debt, you may have other unsecured debts, and bankruptcy can wipe these out as well.

If you file for Chapter 13 rather than Chapter 7, you may have to pay back some portion of your unsecured debts. However, any unsecured debts that remain once your repayment plan is complete will be discharged.

Stop creditor harassment and collection activities. Bankruptcy can stop creditor harassment. If the harassment is serious – if the creditor is about to repossess your car or foreclose on your mortgage, bankruptcy can help.

An Overview of Chapter 7 Bankruptcy

Bankruptcy Costs in Time and Money
The whole Chapter 7 bankruptcy process takes about four to six months, costs $299 in filing and administrative fees, and commonly requires attendance at a meeting called a 341 meeting.

Who Can File
Chapter 7 can be a powerful remedy for debt problems, but it isn’t available to everyone. For example, you won’t be able to use Chapter 7 if you already received a bankruptcy discharge in the last eight years (depending on which type of bankruptcy you filed) or if, based on your income, expenses, and debt burden, you could feasibly complete a Chapter 13 repayment plan.

Bankruptcy Forms
To file for bankruptcy, you fill out a two-page petition and a number of other forms. Then you file the petition and forms with the bankruptcy court in your area. Basically, the forms ask you to describe:

• Your property
• Your current income and its sources
• Your current monthly living expenses
• Your debts
• Property you claim the law allows you to keep through the bankruptcy process (called “exempt property”) – most states let you keep some equity in your home, clothing, household furnishings, Social Security payments you haven’t spent, and other necessities such as a car and the tools of your trade.
• Property you owned and money you spent during the previous two years, and
• Property you sold or gave away during the previous two years.