Benefits of a Chapter 7 Bankruptcy
Eliminate Unsecured Debt
What is A Chapter 7 Bankruptcy?
The Chapter 7 bankruptcy is a matter of federal law which discharges debts for an individual or a business and offers them a fresh start. During the process of a Chapter 7, most of an individual’s unsecured debts are eliminated. This is typically the type of bankruptcy suggested by a bankruptcy attorney when a person has very few or no assets. The most typical types of unsecured debts that are discharged are debts such as credit cards, personal loans, medical bills, judgments as a result of a car accident, or deficiencies on vehicles that have been repossessed. A bankruptcy attorney in NJ can help to guide an individual through the process of a Chapter 7 Bankruptcy as it can become complicated.
Get A Fresh Start
Benefits of Filing a Chapter 7 Bankruptcy
The Chapter 7 discharge applies to individuals, not to corporations and partnerships; although these entities can file Chapter 7. Bankruptcy is a temporary setback, not a permanent situation. You can file a Chapter 7 bankruptcy and still obtain credit after the filing. Certainly, your credit can and will be impacted by the Chapter 7 or other bankruptcy filing, but it can be repaired. You can get out from under the heavy burden of foreclosure, credit card, or medical debt, or a home underwater and get a fresh start.
One of the primary reasons that an individual files a Chapter 7 bankruptcy is to be able to start over. This type of bankruptcy will discharge debts that are owed. However, the debtor has an option of maintaining any of the debts that can be properly managed by signing a “Reaffirmation Agreement.” Filing a Chapter 7 bankruptcy will bring immediate relief from debt collectors as they are not allowed to make contact after the proceedings have begun. The debtor will also enjoy being protected from wage garnishments. Besides offering the debtor a fresh start, any wages that are earned or property obtained after the bankruptcy will be exempt from the bankruptcy. There is not a minimum amount of debt that has to accrue before an individual can file a Chapter 7 which is a great benefit for someone who feels that they are drowning in debt no matter what its monetary value. Chapter 7 is one of the least expensive and quickest ways to discharge debts. After the bankruptcy is complete the individual can pretty easily reestablish their credit. Even though they may have to pay higher interest rates they can still purchase a home, or open credit card accounts.
Property Under a Chapter 7 Bankruptcy
As long as an individual does not have a large amount of equity in their property they can usually keep their mortgage as well as a vehicle. These have to be current and they will have to make arrangements with the creditor to establish or reestablish a payment schedule. The payments on any property that is retained will have to be kept up to date. Generally, individuals find that they are able to keep their car, home and personal belongings while eliminating their other debts.
Non-Exempt Property
When a Chapter 7 bankruptcy is filed an interim Trustee is appointed to the case by the US Trustee’s Office. The Trustee will be the one responsible for liquidating all of the individual’s assets. The assets, if any, are collected and then sold in order to pay down the debts. The Trustee is responsible for this liquidation so that unsecured creditors can realize a maximized return. But in some instances the individual has no assets. If this is the case, then they will file a “no asset” report which will eliminate the distribution of funds to the unsecured creditors. Usually, at the opening of a case it is apparent if it is a no asset or an asset case. The Trustee will send out a proof of claim to all of the creditors listed in the case. They have up to 90 days to file a claim. The IRS and other government agencies have up to 180 days to file this claim.