Chapter 7 Bankruptcy: Learn the Basics Before You File


If you are considering declaring bankruptcy, you will need to talk to a lawyer to find out the method that is best for you. However, you should get an overview of the available options and chapters before you consider this pathway. Find out the basics of chapter 7 bankruptcy before you start planning to file.

Chapter 7 is considered the most common type in the U.S., and involves giving all non-exempt assets to a trustee, who then liquidates it into cash so that the creditors can be paid back. The point of this is to offer a fresh financial start for the debtor, who has to give up most assets but gets the benefit of being considered debt-free afterward. Aside from becoming debt-free, another bonus is that creditors will have to stop contacting you after you file. This means that you can put a stop to constant calls that harass you for money, so the sooner you start the process, the better. The longer that the situation is allowed to stay the same, the worse it will get, so it's important to speak with a professional as soon as you suspect you may not be able to come back on your own.

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This pathway is a popular one because many people get in over their heads in debt that they cannot control. In fact, one of the main reasons for declaring chapter 7 bankruptcy in this country is medical bills that are much too high to pay. Sudden unemployment, divorce, credit card bills that have spiraled out of control are all other common reasons for filing. If there or similar reasons have you thinking about this path, you are not alone.

The chapter 7 bankruptcy will stay on your credit record for ten years, but getting rid of the bills that may be piling up will likely save you enough money and worry to be worth it. Your credit score may suffer at first, but once you are relieved from the initial debt, you can work on improving the score once again. It will literally feel like you have a fresh start. Of course, you will have fewer assets than before, but you are allowed to keep certain exempt property, which your lawyer can talk to you more about. These professionals are trained to know which property is exempt from foreclosure and which is not, so it is very inadvisable to attempt to go through this process by yourself, as you may make a fatal mistake that results in very valuable property being needlessly lost. Additionally, some forms of debt cannot be discharged via filing; for example, child support, IRS debt and student loans will follow you to the grave.

If you have decided that chapter 7 bankruptcy is the best route for you, it is time to find out if your attorney agrees. Once you both decide on this option, you can get started planning the process. The sooner you file, the sooner you will be free from debt, which is why learning about the different options available before you see a lawyer is advised.


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