Filing Chapter 7 Bankruptcy? What You Need to Know

Posted on: 24 April 2020

If your financial situation has resulted in declaring bankruptcy, you likely have several questions about how the process will work. Here are some things you need to know about bankruptcy.

Will All Debts Be Discharged with Chapter 7 Bankruptcy?

The goal of Chapter 7 bankruptcy is to quickly discharge your debts so that you can get a fresh start with your finances. Many of your unsecured debts will be completely discharged so that you do not have to pay them back. However, this will involve liquidating assets to pay off as many of the debts as possible. 

There are also assets that will never be discharged with Chapter 7 bankruptcy. This includes back taxes, child support, alimony, and student loans. You will still be expected to pay off those debts after the bankruptcy is finalized. 

What Assets Are Non-Exempt From Liquidation?

Each state has its own laws regarding what assets you can exempt from liquidation. This means it is possible to keep your home and vehicle, which are two of the main assets you likely have that you are worried about. Some states allow for additional exemptions if they could be detrimental to your ability to work after a bankruptcy. For example, if you own equipment that is necessary for you to do your job. 

In general, expect luxury items to be liquidated as part of a Chapter 7 bankruptcy. This could include a second home if you own one, or expensive unessential assets in your home like artwork. 

Will Creditors Be Able to Contact You About Debts?

One of the benefits of using bankruptcy is that you will no longer be bothered by creditors that you owe money to. They will not be allowed to contact you throughout the bankruptcy process or ask for their money after a debt has been discharged. A creditor could be penalized for violating the court order that prevents them from contacting you. Your lawyer may even be able to sue the creditor for punitive damages as a result of their actions. 

Will Others Know About Your Bankruptcy Filing? 

If you have concerns about what other people will think about you using bankruptcy, know that it is part of the public record. The only people that will find out about it are those who take the necessary steps to look up your bankruptcy petition. While it is not something that you can hide, the information is something people need to actively seek out to discover. 

If you need to file for chapter 7 bankruptcy, contact resources such as David M. Todaro Co., LPA.