What, exactly, happens during Chapter 7 bankruptcy? Chapter 7 bankruptcy is often referred to as Liquidation, and allows the sale of the debtor’s assets so that the cash may be distributed to the creditors, instead of arranging a repayment plan, as in Chapter 13 bankruptcy. Depending on the laws in the state where the debtor lives, he or she may be able to keep certain personal items or even real estate. A reputable Chapter 7 bankruptcy attorney will be able to explain whether this is the case or not, as well as advise the debtor how to file for bankruptcy. Once the petition is filed under Chapter 7 bankruptcy, most collection actions (including lawsuits and wage garnishments) against the debtor are stopped.
How to File for Bankruptcy:
To file for bankruptcy, the debtor must file a petition to the bankruptcy court where he or she has a residence or business. In addition to the petition, a list of assets and liabilities, a list of income and expenditures, a statement of financial affairs, and a list of contracts and unexpired leases must also be submitted, along with the filing fees. During the filing, the debtor may wish to obtain an attorney, who can help with the copious amounts of paperwork and prevent errors that may get the case thrown out. A Chapter 7 bankruptcy attorney may also provide the debtor with options regarding the waiver of filing fees.
How long does Chapter 7 bankruptcy last?
The liquidation process normally takes about six months from filing to completion, however, the bankruptcy itself can stay on the debtor’s credit report for a long time after the process is complete. Fortunately, the timely payment of future bills can work wonders toward repairing the debtor’s credit score.