What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is known as the “fresh start” or “straight” bankruptcy. When you think of bankruptcy, this is probably what you are thinking of. It is the most popular bankruptcy, and generally it is quick and relatively easy to navigate.

Like any other bankruptcy, when the bankruptcy petition is filed with the court, something called the “automatic stay” goes into effect. The automatic stay is like a door slamming shut on your creditors. Once it is in place, your creditors cannot attempt to collect a debt in any way. That means no more harassing phone calls and no more nasty collection letters. If you have been sued by a creditor, the automatic stay will stop the lawsuit. Not only that, but if you have a judgment against you, and the creditor is trying to enforce the judgment (either on your property or bank account), the automatic stay will stop the creditor from enforcing that judgment.

Most people who file for Chapter 7 are able to keep all of their possessions, including their car, their home, and their retirement accounts (such as a 401(k) or IRA). Bankruptcy law allows you to keep certain property, and a good bankruptcy lawyer will guide you and apply the law to your specific circumstances. That way you can maximize the amount of property you can keep and still greatly benefit from the bankruptcy.

Most Chapter 7 bankruptcies have only one hearing. The hearing takes place some thirty to forty-five days into the case. This hearing isn’t even in a courtroom and it is not in front of a judge. A Trustee conducts the hearing and it shouldn’t even last very long. If you have an attorney, he or she will accompany you and sit beside you during the hearing.

There are some qualifications to determine if you qualify for Chapter 7. A good bankruptcy lawyer will know these qualifications and determine if you qualify. You should consider Chapter 7 if you are too deep in debt and there is no way you can pay off your debts, or even keep up with the minimum payments.

Chapter 7 isn’t for everyone – for instance Chapter 7 may not be appropriate if you are behind on your mortgage and want to save your house, or if you have extensive tax debts. Student Loans are not dischargeable in bankruptcy.

If you find yourself too deep in debt, and cannot possibly pay your bills, I can help. If you are facing a foreclosure, utility shut off, or lawsuit, I can help. Please call my office at (814) 240-1013 or email me at richarda@johnstownbankruptcy.com with your questions. The first office consultation is free and payment plans are accepted.

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