What Happens To The Debt In Chapter 7 Bankruptcy 2022

When you declare bankruptcy, you will file a petition in federal court. Once your petition for bankruptcy is filed, your creditors will be informed and must stop pursuing any debt you owe. The court will then request certain information from you, including:

  • The total amount of debt you owe
  • A complete list of all your creditors
  • An accounting of your total income
  • An accounting of your outgoing expenses

You are permitted to represent yourself in bankruptcy court. You are also allowed to hire a bankruptcy lawyer who can serve as your advocate and help you navigate the complicated process of what happens if you declare bankruptcy. 

Having your debt discharged or reorganized in bankruptcy court can take a lengthy period of time. Should you get a lawyer, your lawyer can help you understand the relevant timeline in your bankruptcy case.

Many might ask themselves a series of questions:
* Do you have to go to court for bankruptcies
* Who pays for bankruptcies
* Will filing bankruptcy stop a civil lawsuit
* Accounting for bankruptcies

In This Article

What happens when you file for bankruptcy?

In addition to putting a stop to relentless phone calls and other debt collection efforts, filing for debt relief through bankruptcy can also have disadvantages that you should be aware of. Disadvantages of filing for bankruptcy protection include:

  • A new start that can help you create a healthy financial future
  • The ability to retain much, if not all, of your personal property and assets
  • Your creditors will be required to cease all debt collection actions

In addition to putting a stop to relentless phone calls and other debt collection efforts, filing for debt relief through bankruptcy can also have disadvantages that you should be aware of. Disadvantages of filing for bankruptcy protection include:

  • Filing for bankruptcy stays on your credit profile for seven to 10 years
  • Filing for bankruptcy can lead to higher interest rates when you are eventually able to obtain financing
  • You will be required to take a court-approved credit counseling course
  • You cannot use bankruptcy to discharge overwhelming debt again for at least four to eight years, depending on what type of bankruptcy you filed 

Each individual or business debt load is unique and requires close scrutiny and careful debt reduction planning. Your lawyer can take a clear, objective, and comprehensive view of your financial situation and help you create a plan to reorganize, reduce, or eliminate your debt.

Choose the Right Bankruptcy Filing for You

We are proud to represent our clients in four primary areas of bankruptcy relief. Called “chapters,” each of these forms of bankruptcy has its own advantages and disadvantages. The four chapters used for filing for bankruptcy, where we help clients find debt relief, include:

  • Chapter 7: Straight bankruptcy, where debts are fully forgiven with few exceptions.
  • Chapter 11: Complex business bankruptcies with debt reorganizations and restructures.
  • Chapter 12: Debt relief and repayment plans for family farmers and family fishermen.
  • Chapter 13: Debt relief for income earners that can help stop foreclosures and other looming debt recovery efforts.

When you decide to declare bankruptcy, your lawyer will help you choose the right bankruptcy chapter for your financial situation. Filing for bankruptcy is a complex, time-consuming procedure. Your lawyer can help you understand and navigate the filing process from your initial petition to final discharge.

Chapter 7 and Chapter 13 Bankruptcy Require a Means Test

While the decision to file for bankruptcy is ultimately a personal one, in certain types of bankruptcy, the court will ask you to take a means test. This test is given to understand your income and expenses. 

The means test:

  • Is required for filers whose income is higher than the state median
  • Will assess and measure your expenses and disposable income
  • Measures your ability to pay the money owed to your creditors

The lawyer who represents you will assist you with the documents and calculations associated with the means test. He will also explain its importance and what happens when the test is complete.

Bankruptcy Provides More Than Debt Relief

Bankruptcy gives you relief from insurmountable debt and the chance to make a new financial start. It also gives you peace of mind by providing relief from relentless and invasive credit collection measures. 

Once you declare bankruptcy, you benefit from an automatic stay. It will immediately notify your creditors of your status and bar them from contacting you via email, USPS mail, or telephone. 

Your lawyer will explain how and when the automatic stay goes into effect, how your creditors are notified, and what happens if your creditors continue to contact you. You may be asked to attend a meeting of your creditors and answer questions about your debt load. Your attorney may also accompany you to this meeting.

Secured Debts Versus Unsecured Debts

Anyone can file for bankruptcy relief regardless of how small or large their debt is. When you file for bankruptcy, you are required to list all the debts you owe. The court does not consider all debt equally.

It recognizes two types of debt—secured and unsecured—as follows:

  • Secured debts are those where the original loan was backed up with property or collateral. Common secured debt includes a mortgage or vehicle loan.
  • Unsecured debts are those where the original loan was offered based solely on your credit. These typically include credit cards, medical bills, and other bank loans.

You Can Discharge Debt Through Bankruptcy

When you file for bankruptcy protection, a discharge from the court will relieve you of your obligation to repay your creditors for certain debts. As noted, once your debt is discharged, your creditors cannot contact you or attempt to collect the debt in any way. A discharge of your debt is also permanent and final for all unsecured debt you include in your bankruptcy filing.

The timing of your discharge will vary according to the type of bankruptcy you filed. A Chapter 7 bankruptcy discharge order can take as little as four months, while a Chapter 13 bankruptcy discharge can take three to five years.

If you are represented by a lawyer in your bankruptcy filing, you and your lawyer will each receive a copy of your debt discharge order. Your lawyer will help you understand what happens if you declare bankruptcy and which debts were discharged by your bankruptcy filing, as well as those you might still be obligated to pay.

Can I File for Bankruptcy on My Own?

You can file for bankruptcy on your own, but the process is long and complicated, and you could benefit from the guidance and clarity a bankruptcy attorney can provide. Even the U.S. Courts recommend working with an attorney to help you fully understand your options, exemptions, bankruptcy’s benefits, and the complexities of the process.

A bankruptcy lawyer will:

  • Be familiar with applicable state and federal laws
  • Obtain all necessary paperwork and documentation
  • Explain files, schedules, and other paperwork
  • Represent you at hearings and in court

For many bankruptcy filers, an important benefit of hiring a bankruptcy lawyer is their peace of mind. This comes from knowing each step is being met, and your fresh financial start will be error-free and effective.

Bankruptcy FAQ:

How Much Do You Have to Be In Debt to File Chapter 7?

You do not have to be in a specific amount of debt to file Chapter 7 bankruptcy. Your income might play a role in your ability to file for Chapter 7 bankruptcy protection, and you might be required to complete a “means test” to determine your eligibility. What Is the Difference Between Chapter 13 and Chapter 7 Bankruptcy?

If your personal or business debt is overwhelming and you are considering filing for bankruptcy, it is important to understand the different bankruptcy filing options you have available. What Is the Downside of Filing For Bankruptcy?

Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. The fact that you sought and received bankruptcy protection will remain on your credit record for as long as 10 years. What Will I Lose If I File Bankruptcy?

Most people who file bankruptcy are able to keep all of their assets. Filing for bankruptcy may seem like an overwhelming experience. However, a lawyer from our firm can help you through the process. What Is the Process of Filing Bankruptcy?

The process of filing bankruptcy begins with deciding which type of bankruptcy is right for you. You will then need to compile important financial documents, submit a petition to your local bankruptcy How Long Does It Take to Do a Chapter 7 Bankruptcy?

How long does it take to file Chapter 7? A Chapter 7 bankruptcy can take four to six months to do, from the time you file to when you receive a final discharge – meaning you no longer have to repay

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