Chapter 7 Bankruptcy
"For many individuals contemplating bankruptcy, chapter 7 remains the most prevalent option. Chapter 7 bankruptcy is optimal for individuals who have substantial debt but few valuable assets. It differs from the other two categories of bankruptcy in that it does not involve a repayment plan or restructuring. Rather, when a chapter 7 petition is filed, the debt is excused or discharged.Not Everything Is Capable of Being IncludedAlthough it may appear to be the ideal filing, those who are contemplating it must understand that not all debts can be included. Student loans are one form of debt that cannot be reported on a tax return. They must be compensated regardless of their financial situation. However, the federal government provides a variety of payment options to reduce the burden of student loan debt. Child support arrears are another form of debt that cannot be included in bankruptcy. A court determines child support as a parent's financial obligation to their offspring. Parents are legally responsible for their children's basic requirements until they reach adulthood or are emancipated by a court. Child support is the portion of a parent's income that is proportional to the amount of money required to satisfy a child's basic needs, as determined by the court.Chapter 7 Remains on Credit Reports for Seven to Ten YearsLegally, credit bureaus are permitted to report a bankruptcy for up to ten years, although some cease after seven. This means that even though a consumer is no longer responsible for repaying debts discharged through this form of bankruptcy, the bankruptcy itself can still have a negative impact on their credit rating. Typically, a person will not be able to obtain a new credit card, secured or unsecured, for several months following discharge. This is because credit card companies wish to safeguard their interests. However, it is not uncommon for credit companies that specialize in poor credit lending to approach those who have recently filed for bankruptcy after a few months have passed. While it's a good idea to obtain one or two of these cards initially, one must be cautious not to repeat the same financial behaviors that got them into this situation in the first place.Chapter 7 Does Not Apply to EveryoneFor those with numerous valuable assets, a distinct form of bankruptcy may be preferable. Chapter 7 does not necessarily provide long-term asset protection for consumers. While it is true that possessions are protected during the initial stay preceding the court hearing, it is ultimately up to the court and, in the case of mortgages or car loans, the lender to determine whether or not filers may keep all of their possessions or be ordered to sell some to recoup the money owed. Those considering this type of protection should consult with a bankruptcy attorney to determine the optimal course of action.
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"Chapter 7 Bankruptcy"
was written by Mary
under the Finance / Wealth
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comments. The article was created on 01 June 2023
and updated on 01 June 2023