Top 10 Benefits of Chapter 7 Bankruptcy
Creditors call all hours of the day and night every day of the week, including weekends. The more outstanding and overdue bills you have, the more phone calls you will be getting looking for payment. The automatic stay you receive when you file for Chapter 7 makes it illegal for creditors to continue those calls or any other form of harassment the moment you file for bankruptcy.
Many people think that filing for Chapter 7 bankruptcy will cause you to lose your most valuable possessions. This is an absolute myth. As long as you don't have too much equity in your home - and if you had a lot of equity in your home you likely wouldn't be filing bankruptcy - and foreclosure proceedings have not been initiated, you will be able to keep your house. As for your car, depending on it's value, there are special exemptions that allow you to keep that as well.
The state and federal exemptions that block what a bankruptcy trustee can seize during a bankruptcy proceeding typically cover all household goods and tools of a trade. Even if you have valuable jewelry or electronics, they often are not seized because of their age and condition. In fact, in 90 percent of all Chapter 7 cases, no property is seized at all.
The amount you owe on credit cards or any debt that isn't secured by some sort of collateral can be completely liquidated if you qualify for Chapter 7 bankruptcy. The only payment an unsecured creditor receives in a Chapter 7 bankruptcy is a fraction of the value of any seized property. But in most cases, there is no seized property.
With no more unsecured debt hanging over your head, paying your monthly mortgage and car note becomes much easier again, allowing you to get back on your feet. For many families who fall on tough economic times, it is the spiraling unsecured debts like credit cards or medical bills that make it impossible to pay all creditors every month and still provide for their families.
There is an income limit with Chapter 7. But if you earn more than the median salary in your state, you can still qualify for Chapter 7 bankruptcy through a Means Test. Simply, this is test that measures whether you have any leftover income at the end of the month to pay unsecured creditors. Notwithstanding your salary, if there is little or no money left over at the end of the month, you qualify for Chapter 7 bankruptcy.
Under the Chapter 7 process, there is one mandatory appearance before the bankruptcy trustee. While it's possible questions from the trustee or creditors could lead to a hearing before a bankruptcy court judge, the overwhelming majority of cases do not require the filer to appear in court again.
After you make the initial filing for Chapter 7 and you wait to hear if you qualify, an automatic stay goes immediately into place. This gives you the chance to relax a little from the financial pressures because the harassing calls will stop and you do not have to pay your unsecured creditors while in bankruptcy.
If there are no complications, a Chapter 7 bankruptcy case can be over in as little as 4 to 6 months. In Chapter 13 bankruptcy cases, most debtors are under bankruptcy court supervision for 5 years.
The fact that Chapter 7 bankruptcy cases move so quickly and the court does not require a lengthy repayment plan like Chapter 13 means you can begin changing your financial habits and re-establishing your credit almost immediately.