When a person’s in deep financial turmoil, they’ll naturally think about filing Chapter 7 bankruptcy. However, Chapter 7 bankruptcy laws can be confusing, and sometimes problematic. If it’s so much trouble, why file for bankruptcy? That’s because there are several benefits of filing bankruptcy, such as debt forgiveness and the chance to start over again.
According to Chapter 7 bankruptcy laws, when a debtor files bankruptcy the trustee cancels all, if not many, debts, while simultaneously liquidating some property to pay the debtor’s creditors. Chapter 7 bankruptcy laws are also referred to as “straight” or “liquidation” laws.
To file, a debtor fills out a petition, amongst other forms, and then, according to Chapter 7 bankruptcy laws, files them with the local bankruptcy court. These forms ask debtors to describe their property, current income, monthly living expenses, debts, and more. They’ll also ask that debtors describe the “exempt property,” which is the property they claim that they law allows them to keep. Most state Chapter 7 bankruptcy laws allow debtors to keep some of the equity in their homes, clothing, household furnishings, unspent Social Security payments, and other necessities such as vehicles and tools of the debtor’s trade.
One of the biggest benefits of Chapter 7 bankruptcy is the “Order for Relief,” which is also known informally as the “automatic stay.” This immediately stops most creditors from trying to collect what’s owed. This means that creditors cannot legally grab/garnish wages, empty bank accounts, or go after cars, houses, or other property.
Although Chapter 7 bankruptcy laws can be tricky to work with, the benefits of Chapter 7 make filing a very effective solution. If you have any questions, feel free to ask in the comments. See this reference for more.