Monday, October 5, 2015

The Basics of Chapter 7 Bankruptcy

If you have chosen to file for Chapter 7 bankruptcy, you are asking creditors for a straight liquidation. A trustee will take an inventory of your assets and then use any money collected to pay off your creditors. In some cases, you may be able to get through the bankruptcy process without paying your creditors anything.

Depending on the amount of debt you have and the type of debt that you have, you could see your debts disappear through discharge within a matter of weeks or months. After the bankruptcy case is over, eligible debts are discharged and you owe nothing more to creditors. However, if a debt has a lien attached to it, that lien is unlikely to be stripped in such a case.

In addition, tax debt, student loan debt and back child support cannot be discharged in bankruptcy regardless of what type you file for. Therefore, these debts will exist until the lender agrees to drop them, the asset attached to the debt is sold, or the statute of limitations related to collecting the debt expires, which varies depending on the type of debt you have.

While the case is still open, your creditors generally cannot contact you asking for repayment of the debt. Once a debt has been discharged, it cannot be pursued at all by a creditor. If a creditor does continue to pursue the debt, an attorney may be able to help you take legal action even if your case has already been closed.

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