Chapter 7 bankruptcy is one of the primary options for those who are seeking bankruptcy protection. Not only is it a main alternative but it is often the most popular option since it doesn't technically require an eventual repayment of unsecured debts. Under the other main alternative for bankruptcy filers: Chapter 13 requires repayment under a reformatted plan as long as the person filing bankruptcy is a wage earner.
So how does Chapter 7 bankruptcy work and why's it so popular? Here are a few points of interest on the subject:
Chapter 7 bankruptcy requires the liquidation of nonexempt belongings for the benefit of the debtor's creditors.
You might list most or all of your belongings as exempt depending on your state's regulations concerning Chapter 7 bankruptcy exemptions.
At the conclusion of liquidation, most of your unpaid debts are discharged which means you are no longer legally obligated to pay them off.
Certain debts such as alimony, child support, student loans, etc. aren't dischargeable and still should be paid off even after the bankruptcy has run its course.
Chapter 7 Bankruptcy Legally Defined
The federal government realizes that most consumers would rather file Chapter 7 bankruptcy than any other kind and have taken measures to prevent this. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 imposed stricter requirements of Chapter 7 cases by imposing a "means test" on applicants. Despite all that, Chapter 7 bankruptcy filings are on the rise and still greatly outnumber Chapter 13 cases.
If you're worried that bankruptcy could be in your future then it's in your best interest to pursue Chapter 7 bankruptcy. If eligible, you might be able to discharge the majority of your debts while still keeping your exempt assets. Talk to a bankruptcy attorney today to learn more about Chapter 7 bankruptcy and how tis explained as a legal term.
