What You Should Know If You Are Considering Filing Bankruptcy – Chapter 7

December 20, 2009 by  Filed under: Bankruptcy 

Throughout the years bankruptcy has often been a confusing and heartbreaking process for thousands of people. The questions that come with such a detailed process are many, and even the answers may not always be as simple as one may like. This article will focus on four simple questions, and provide simple and effective answers to the biggest questions.

What is a Chapter 7 Bankruptcy?

When considering bankruptcy as a solution, it is important to know the difference between the two main forms: Chapter 7 and Chapter 13. A Chapter 7 bankruptcy, often referred to as a straight bankruptcy is basically a liquidation of the debtors property in order to pay for debt owed to different creditors. In this form, the debtor usually has no losable assets and therefore is given a relatively quick ‘new start’ to life, which is one of the main purposes of having bankruptcy laws.

What is a Discharge in a Chapter 7 Bankruptcy?

Within three to five months of the bankruptcy process the debtor is usually given a ‘discharge’ of all non-exempt debts, meaning that any debts included are no longer the responsibility of the debtor to repay. Effectively a discharge prevents a creditor from performing any kind of collection (be it letters, phone calls, or personal contact) on debts that have been discharged, and all personal liability is released, with the exception of any liens that may not be incorporated into the proceedings.

Why Do People File A Chapter 7 Bankruptcy?

The most frequent reasons for this form of bankruptcy are overextending medical expenses or credit, marital problems, and any other large and unexpected bills. Unemployment is often a reason that leads to many of these problems, and therefore is sometimes included in explanations. A Harvard study published online in February of 2005 by Health Affairs stated that illness and medical expenses caused 50.4% of personal bankruptcies in 2001, and affect around 2 million Americans annually.

How Does the New Bankruptcy Law Affect a Chapter 7?

While the new bankruptcy laws have been given a negative slant since their release, many are still eligible and can still file. Basically the new law stops some citizens with higher incomes from using a Chapter 7 and instead makes them file under a Chapter 13. In addition, credit and budget counseling is required before bankruptcy filing is possible, and more counseling is required before any debts can be erased.

Money education has sometimes been blamed for ones credit crises, and the new law aims to solve that problem. New requirements have also been placed on bankruptcy lawyers, such as the lawyers’ accountability for accuracy of all information submitted.

All in all bankruptcy is a very serious matter, and while you can do a large amount of research on your end, it is always necessary to seek professional advice and counseling in these situations. While the new laws may make bankruptcy lawyers harder to find, it also has weeded out many who were not serious about helping people who find themselves in hard situations. Call around and find a lawyer you are comfortable with and one that you fell will make this hard situation seem just a little easier.

For more information and guidance about financial laws and financial protection, visit http://www.kanzerlaw.com. Kanzer Law specializes in bankruptcy information.
Matthew Eddington author’s articles for WebDrafter.com, Inc. ( http://www.webdrafter.com ), which produces Website design, hosting, and search engine marketing services.

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