Bankruptcy law chapter 7, also often called straight bankruptcy is basically a liquidation process. You as a debtor must hand over all your property (except the exempt one) to the trustee who is appointed by the court. Trustee then sells of or changes that property in cash that is returned back to your creditors.
You as a debtor are going to be discharged within a period of up to four months.
Why is bankruptcy law chapter 7 so popular?
If you have no property to lose, chapter 7 bankruptcy will provide you with an opportunity for a fresh start. Or so it was before the 2005 bankruptcy law changes.
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Bankruptcy law chapter 7 is without a doubt the most usual type of bankruptcy filed in the US. It is usually filed for by either an individual or a business (business file usually for Chapter 11) when his debts become unbearable. You may choose to file for it by yourself or that decision may be forced upon you by the court.
If you are a business, you will be required to sell all of your assets, return money gained by the sell of to the creditors and close down your operation. For individuals filing under bankruptcy law chapter 7 the process is similar with only difference being that you have nothing to close down.
Be aware that under the new bankruptcy law some kind of debts can no longer be discharged.
So what are the advantages of filing under bankruptcy law chapter 7?
1. Any debt amount can be completely cleared, and once you are discharged, you are 100% clear of debts.
2. There is also no minimum amount of debt needed in order to file for it.
3. Creditors no longer have any claim on you. Your wages and possessions bought after the discharge are your own and nobody, except you, has any claim over them.
4. It is very fast, you stand a very good chance of your claim being discharged in the next 4 - 6 months.
And the disadvantages are?
1. You can loose all your property.
2. Not all debts can be discharged.
3. Your home loan co-signers can end up paying for your loans (unless they seek similar protection)
4. You can only file under bankruptcy law chapter 7 once every 6 years.
5. Your credit rating will be shattered (but there are ways to improve it). In addition, you will find it much harder to get a loan of any kind.
6. If you are a young person, it will be very difficult for you to buy home and start a family with chapter 7 around your neck, and if you are already married, you should know that divorce very often accompanies bankruptcy.
7. Withdrawing your claim for Chapter 7 is extremely difficult if not impossible.
So there you have it, make sure to get a good bankruptcy lawyer and consult with her/him whether you should or should not file under bankruptcy law chapter 7.
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