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What Is Chapter 7 Bankruptcy?
The United States Government has set up Bankruptcy courts and laws to help citizens and businesses find solutions to pay their creditors. Such courts and laws are set up to protect people on both sides of the equation so that the best possible solution can be found. Currently, there are three main chapters of Bankruptcy Code, which are Chapter 7, Chapter 11 and Chapter 13.
Chapter 7 Bankruptcy is a way to discharge all of your insecure debts (i.e. credit cards, personal loans, bills, etc.) Chapter 7 involves a liquidation process where the trustee will collect all of your assets and sell any assets that are not exempt. Once the trustee sells your assets they will pay you and the debtor any amount exempted. The net proceeds of the liquidation are divided up and paid to your creditors. There is a fee taken by the trustee overseeing the distribution of liquidated assets.
It’s important to know that certain debts cannot be discharged in a Chapter 7 bankruptcy, which includes:
- Child support
- Fraudulent debts
- Certain taxes
- Most student loan debt
You can access Chapter 7 Bankruptcy by filing through the federal courts. It begins by filling out a ton of paperwork where you will be asked to fill out all of your personal information as well as a myriad of other questions surrounding employment, income, disability insurance, income taxes, etc. The paperwork step is a huge endeavour, and this is why many professionals will suggest working with an attorney to file for Chapter 7 Bankruptcy. There are many moving parts, and accuracy is important to ensure that the process is filed correctly.
The next step is to determine which of your properties are exempt from seizure. The Maryland District Bankruptcy Court handles this part of the process. In order to get to stage two, you will be required to fill out a two-page petition and your schedules (a group of forms) and file it with the court. The creditors and the judge have the final decision when it comes to approving your request or not, this is another reason why you want to hire an experienced attorney. In the end, if all goes well, you will have discharged all of your debts, and you don’t have to worry about losing any of your properties and can begin to move forward with your life.
However, some reasons why Chapter 7 Bankruptcy can be denied are as follows:
- Hiding income
- You are not complying with a court order
- Transferring, moving, or concealing property
- Failing to take the two mandatory finance instructional courses
- Using credits cards during the pendency of Bankruptcy
As long as you comply with these rules, your Chapter 7 Bankruptcy case is more than likely to get accepted. The Law Offices of Thomas Maronick Jr LLC is built by a team of local bankruptcy lawyers in Maryland. We can review your case in detail and help you file the case so that you get the best outcome!
What Are The Benefits?
If you are consumed by debt, Chapter 7 Bankruptcy is a way to get yourself out of high-interest debt and get back on a more clear financial footing. Some benefits of Chapter 7 Bankruptcy include the following.
You can discharge most of your debt and/or pay off creditors quickly and fairly. By filing for Chapter 7 Bankruptcy, there is no obligation for you to repay the qualifying debts. Instead, the debts are wiped clean.
Most Chapter 7 Bankruptcy cases can take less than six months to complete and can be done with a law firm’s help, which helps take the stress and burden off your shoulders.
Relief From Creditor Harassment
When you file for bankruptcy, the judge will enact an automatic stay on creditors, forcing them to stop connecting you and/or repossessing your property.
You Can File for Exemptions
Filing for Chapter 7 Bankruptcy does not mean that you have to sell everything you own. There are exemptions written into the law that is designed to help you keep what matters most (more on this in the next chapter).
Rebuild Your Credit Score
Chapter 7 Bankruptcy does damage your credit score, but it allows you to start fresh and slowly rebuild it back over time.
What Is The Downside Of Chapter 7 Bankruptcy?
The downside to filing for Chapter 7 bankruptcy is that your credit rating will be destroyed for an extended period of time, and bankruptcy will be on your record for 7-10 years. You will also have a more difficult time to rebuild your credit. However, Chapter 7 bankruptcy is faster than filing for Chapter 13 bankruptcy (which is where you pay some of the debt instead of discharging all of the debt). Chapter 7 bankruptcy will also stop collection calls and will stop debt-collection lawsuits. So there are some advantages if you are in serious debt!
Is Chapter 7 Bankruptcy Right For You?
In most cases, people utilize Chapter 7 Bankruptcy when they have large credit card debt as well as other unsecured bills and few assets. Chapter 7 Bankruptcy is designed to eliminate these debts by liquidating your assets completely.
It’s also important to note that you may be able to keep certain secured debts such as your car, furniture, home, etc. by reaffirming those debts. If you want to keep such debts you may have to sign a voluntary “Reaffirmation Agreement,” which allows you to keep such debts by reaffirming them. By doing this, you will still owe that debt, and you must continue to pay it just as you were obligated to continue to pay it before you filed bankruptcy. You also cannot bankrupt (or wipe-out) that debt again for 8 years. To reaffirm the debt, you will have to make up all of the payments due to reaffirm it– this is called ‘bringing it current’. Reaffirmation agreements can be set aside during the earlier of 60 days after the agreement is filed with the Court or upon the Court’s issuance of an Order of Discharge.
The best way to determine if Chapter 7 Bankruptcy is the best decision for you is by booking a consultation with a local Chapter 7 Bankruptcy attorney. A trained professional will assist in listening to your situation and determining if Chapter 7 Bankruptcy is right for you.
Get Started Today
Our proven bankruptcy lawyers can help you determine whether Chapter 13 is the right debt relief approach for you. Contact us online or call us at 410-885-1775 today to schedule your free initial consultation.