May 19, 2014
Chapter 7 bankruptcy cancels most individual debts. Its main purpose is to give people who are hopelessly burdened with debt a fresh start quickly, without having to establish a plan to pay creditors. In most Chapter 7 cases, the debts are discharged and the case is completed within 3-4 months after the case is filed.
Protect Your Property from Creditors’ Reach
Not only can you wipe out your debts by filing Chapter 7 bankruptcy, you normally can also keep all of your property including your house, your car, savings and retirement accounts.
The court recognizes that you need transportation, housing, clothing, household goods and other basics to be able to get a fresh financial start, and does not expect you to give these up.
In fact, if any creditor tries to collect money or take property from you after you file Chapter 7 bankruptcy case, such creditor could face court fines and sanctions.
Stop Creditor Harassment as Soon as the Case is Filed
If creditors are calling you non-stop, sending you collection letters, threatening you with a lawsuit, bothering you at work, harassing your family, you can put an end to it by filing Chapter 7 bankruptcy.
And if you hire us to be your Chapter 7 bankruptcy attorney, creditors will have to contact us and not you, if they have any claims or questions.
You will not have to explain your situation to them, or to worry about being pressured to make a payment. As soon as we file the case, even though the case is still pending and the debts are not yet discharged, the court will impose a so-called “automatic stay” against collection activities by creditors. As your Chapter 7 bankruptcy lawyer, we will be answering your creditors’ inquiries, and will investigate any possible violations by creditors of the automatic stay imposed by the court. We will also communicate with the court and the bankruptcy trustee as needed to make sure your case is progressing smoothly, and your debts are successfully discharged.
Stop Garnishments, Bank Levies and Halt Lawsuits
If a creditor has obtained a judgment against you, typically he is entitled to garnish 25% of each of your pay checks. Additionally, a creditor with a judgment can go after funds in your bank accounts, and can put a lien on your house. Garnishments and bank levies can quickly make a bad financial situation worse, making it unrealistic to pay even for rudimentary necessities.
The filing of a Chapter 7 bankruptcy case is one of the most effective ways to prevent the garnishment, if it has not started yet, and to put a stop to the garnishment if it has already started. The filing of the case will also stop the bank levies, and prevent recordation of liens on your real estate.
If you think there may be a pending judgment against you, consult a Chapter 7 bankruptcy lawyer as soon as possible to prevent loss of your earnings and property.
Wipe Out Credit Cards, Medical Debts, Payday Loans, Personal Loans and Other Unsecured Debts
Chapter 7 bankruptcy case is a very powerful tool to wipe out credit card debts, medical debts, payday loans and personal loans. As long as these debts are not secured by any tangible collateral such as your car or electronics, they can be eradicated without a payment, so that you are able to start fresh after the case is completed.
If you have any secured debts such a car loan or mortgage, you usually have a choice of continuing to make payments the same way as before, or surrendering the collateral in your bankruptcy case if you are not able to make payments.
Eliminate Repossession and Foreclosure Debts
When you file Chapter 7 bankruptcy case, you can eliminate the debts associated with repossessed, foreclosed or returned real estate or personal property.
Many people incorrectly assume that if they no longer have the house or the car, they don’t have to worry about being liable for the loans associated with that house or car. However, the banks often can and will pursue collection of deficiencies on vehicle loans and mortgages, especially home equity lines of credit. In fact, the banks may be particularly motivated because such loan deficiencies often involve substantial amounts of money.
These loan deficiencies get wiped out through a Chapter 7 bankruptcy case just like any other unsecured debt.
Start Saving Money Sooner
Bankruptcy is more reliable, cheaper and quicker than debt settlement or debt consolidation.
Chapter 7 bankruptcy is more reliable because creditors are bound by the court’s orders – in contrast, they do not have to participate in debt consolidation programs. While it is true that with debt settlement or consolidation, you may be able to get some of your creditors to lower payments or reduce balances, the other creditors will still be going after you aggressively.
Filing Chapter 7 bankruptcy is a cheaper alternative – not only do your debts get wiped out without a payment plan, but you do not have to pay taxes on the debt that is discharged through bankruptcy. Additional tax liability is a hidden cost of debt settlement. Cancelled debt is generally reported by the bank as your income on a 1099 form, which you have to pay taxes on.
While debt settlement or debt consolidation plans may take years to complete, in a typical Chapter 7 bankruptcy case your debts get discharged within three to four months without a payment plan, so that you can get on with your life and start saving money sooner. If you qualify to file Chapter 7 bankruptcy, that means that the court believes you do not have the ability to pay back the creditors without sacrificing your basic needs, such as adequate housing or health insurance, which you might have to give up in case of debt settlement.
Start Rebuilding your Credit
Bankruptcy reboots your financial record and allows you to start with a clean slate.
While the record of filing Chapter 7 bankruptcy case stays on your credit report for up to 10 years and is a negative event, many people who are in a difficult financial situation already have low credit scores because of excessive debt and possibly a history of late or missed payments. Wiping out debt boosts the credit score.
If you take affirmative steps to build up your credit after bankruptcy – for example, by taking out a secured credit card, using it, and repaying it each month to establish good history of payments – then your credit score will improve even sooner. It is not unusual for the credit score to be higher soon after completion of the bankruptcy case than before filing Chapter 7 bankruptcy.
We caution you against relying on bankruptcy advice and rumors relayed by friends or family. Although they have your best interests in mind, they may not possess the knowledge of bankruptcy law necessary to give legal advice. Each person’s situation is different, and has to be considered carefully. When the petition is prepared correctly, and you have good rapport with your bankruptcy lawyer and understand the process, a Chapter 7 case is usually very straightforward, you receive the discharge of your debts quickly without losing your assets, and are able to start rebuilding your credit immediately after the case wraps up.