Bankruptcy Explained

Going through the process of filing chapter 7 bankruptcy is not something that anyone wants to deal with. However, sometimes extenuating circumstances lead to the necessity of filing bankruptcy. Here are the basics of chapter 7 bankruptcy and how it works.

Chapter 7 Bankruptcy

This type of bankruptcy will allow you to cancel the majority of your debts. This is much like getting a clean slate in order to start over financially. With this type of bankruptcy, you will basically subject your entire financial life to the court's discretion. They will look at your situation and possibly liquidate assets in order to repay your creditors for you. Therefore, even though you do get somewhat of a clean slate to work with, it comes with a price.

Filing Chapter 7

In order to successfully file chapter 7 bankruptcy, you will have to do the necessary paperwork for the court. You will need to visit the local bankruptcy court and provide them with the proper information. You will have to fill out a petition that requests bankruptcy protection from the court. You will have to provide them with information about your debt situation, any assets that you have, your income and how much money you spend on a monthly basis.

Credit Counseling

In order to complete the bankruptcy process, you will have to attend credit counseling. There are certain agencies that are approved by the United States Trustee that can administer credit counseling. This process will help you look over your financial situation and determine if bankruptcy really is the best option for you. They might try to talk you into trying debt settlement or a debt management plan before going through with bankruptcy. In order to get through the process of bankruptcy, you will have to provide proof that you attended a credit counseling session.

Trustee Meeting

During this process, you will be working with a bankruptcy trustee that works for the court. This is an individual that attempts to collect as much money for your creditors as possible. They will review your paperwork and make sure that everything appears to be in order. You will have to attend an official meeting with them and answer any questions that they might have. Keep in mind that the trustee gets paid depending on how much money they collect. Therefore, they will be evaluating your situation in great detail to try to uncover any hidden assets that you might have.

Automatic Stay

The bankruptcy court will issue an order of relief also known as the automatic stay. Once this is in effect, your creditors will immediately have to stop trying to collect any debt that you owe them.

Completing the Process

Once you complete the necessary paperwork and pay a fee of approximately $300 to the court, this process will typically take about six months to complete. The trustee will sell any property that they need to in order to repay your creditors. In most cases, secured debts such as your house and car will be left alone through this process. Once the process is done, your debts will essentially be cleared, and you will be able to start over with your financial life.

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