Filing for Chapter 7 bankruptcy can have a serious impact on both your debts and your assets. Understanding how this type of bankruptcy will impact these different areas of your life is essential to determining whether or not Chapter 7 bankruptcy is truly the right debt relief option for you. Below you will learn more about what you can expect when filing your bankruptcy petition.
Understanding The Impact On Your Debts
Immediately after filing your bankruptcy petition, the court will issue a stay that prevents your creditors from taking any further action to collect your debts until after the court has ruled. This stay applies to both secured and unsecured debts. However, creditors that will not be impacted by the final outcome of your case may petition the court to lift the stay and allow collection efforts to resume. This is most common when dealing with secured debts since these debts cannot be discharged as part of a Chapter 7 bankruptcy.
Throughout the course of your bankruptcy case, the court will examine all of your debts and determine which debts are eligible for discharge. In most cases, this will include all unsecured debts, such as credit card bills, medical bills, and judgements. At the conclusion of your case, these debt will be discharged and you will no longer owe these creditors any money. However, you will still be required to pay any debts that were not discharged as a result of your bankruptcy, such as your mortgage, car loan, and child support payments.
Understanding The Impact On Your Assets
When examining your financial situation, the court will not only look at your debts, but your assets as well. This is because current bankruptcy laws require that you pay off as much of your debt as possible before the court is able to discharge your remaining debt. This is done by seizing any excess assets that you may have and selling them to help cover your debt.
When determining which assets you are allowed to keep, the court will rely on a set of laws known as bankruptcy exemptions. These exemptions dictate both the type and value of assets you are allowed to maintain during a Chapter 7 bankruptcy case. For instance, current exemption laws will allow you to maintain a moderately priced home, vehicle, and tools of your trade. You will also be allowed to keep a limited amount of personal belongings, such as furniture, jewelry, and clothing.
While the information can help you to better understand how the bankruptcy process will impact your debts and assets, it is important for you to realize that no two bankruptcy cases will be identical. The different types of debts and assets that you possess can greatly impact the benefits and potential consequences that you will endure when filing a Chapter 7 bankruptcy petition. This is why it is so important to consult a qualified attorney, like those at Wagner Law Office PC, that can carefully examine your financial situation before deciding if bankruptcy is the right option for you.