In 2011 there were nearly one million applications for bankruptcy protection. Yet the notion persists that bankruptcy is an embarrassing process that will ruin any opportunity for financial well-being.
Chapter 7 is sometimes called “liquidation”, although that description isn’t very accurate.
The case begins with a voluntary petition. You didn’t do anything wrong, and no one is forcing you to go to court. The typical Chapter 7 debtor (the person filing the voluntary petition) simply has accumulated more debt than can be repaid. Generally the debtor’s situation can be traced to unemployment, illness, a failed business, or some similar condition over which the debtor had no control.
Immediately upon filing, an automatic stay stops any collection activity by any moneylender.
Assets and Liabilities
Exempt assets (e.g., your home, your vehicles, your retirement savings, and your personal belongings) cannot be sold pay the moneylenders. Nonexempt assets (which would include things like vacation homes and boats) can be sold to pay the moneylenders. Debts are divided into secured (such as a home mortgage), priority unsecured (such as child support), and general unsecured (any personal loan).
About six weeks after the petition is filed, there will be a meeting with the trustee to ensure that all proper procedures have been followed. About three months later, all unsecured debts will be discharged. Your credit score will go down, but it was probably pretty low already. And with every on-time mortgage payment and car payment, your score will rise.
For more information on the Chapter 7 process, and whether it is right for you, contact Henley and Henley for your free consultation.