Chapter 7 bankruptcy is one of the main options for those who are seeking bankruptcy protection. Not only is it a main option but it is frequently the most preferred option since it doesn't technically require an eventual repayment of unsecured debts. Under the other main option for bankruptcy filers: Chapter 13 needs repayment under a reformatted plan as long as the person filing bankruptcy is a wage earner.
So how does Chapter 7 bankruptcy work and why is it so preferred? Here are a few points of interest on the subject:
Chapter 7 bankruptcy requires the liquidation of nonexempt possessions for the benefit of the debtor's creditors.
You may list most or all of your belongings as exempt depending on your state's regulations pertaining to Chapter 7 bankruptcy exemptions.
At the conclusion of liquidation, most of your unpaid debts are discharged which means you are no longer legally obligated to pay them off.
Certain debts such as alimony, child support, student loans, etc. aren't dischargeable and still must be paid off even after the bankruptcy has run its course.
Chapter 7 Bankruptcy Legally Defined
The federal government realizes that most consumers would rather file Chapter 7 bankruptcy than any other kind and have taken measures to stop this. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 imposed stricter requirements of Chapter 7 cases by imposing a "means test" on applicants. In spite of all that, Chapter 7 bankruptcy filings are on the rise and still greatly outnumber Chapter 13 cases.
If you are worried that bankruptcy could be in your future then tis in your best interest to pursue Chapter 7 bankruptcy. If eligible, you may be able to remove the majority of your debts while still keeping your exempt assets. Talk to a bankruptcy attorney today to learn more about Chapter 7 bankruptcy and how tis defined as a legal term.
