What Is Chapter 7 Bankruptcy
Many people have asked what is chapter 7 bankruptcy and the simple answer would be that this particular legal proceeding might be the most drastic of the measures a debtor can take to be discharged from crushing personal debt. This is the action that most people think of when the word bankruptcy might be mentioned. Images of auctioneers selling off all of a family's possessions while the family sits on the porch watching memories being sold. In the old days this measure might have brought up phrases like "debtor's prison" or "becoming homeless." Its still a drastic action, but the absolute doom and gloom of old need not necessarily accompany such a decision.
For sure, the question of what is chapter 7 bankruptcy must first be answered with the word failure. This legal action would be the result of someone failing to handle credit reponsibilities, either of the self inflicted version or because of circumstances compeltely out of the person's ability to change. The first cause of having to file this dissolving of assets can be related to the inability to handle to privilege of credit. Reality says that many people have succumbed to the temptation of trying to live above their income level by relying on credit as the vehicle to take them to that next level. As the debt increases and the payments on those monthly bills never stop, living paycheck to paycheck becomes a reality and soon a large unexpected circumstance arises where there can be no more money on which to live and the decision comes down to eat or feed the creditors. The second reason may simply be an horrific medical expense not covered by insurance that totally wipes out a person's ability to pay.
When asking what is chapter 7 bankruptcy, the answer must also include the accompanying feelings of shame, loss, and perhaps guilt at walking away from promises may to creditors to repay a loan. For many, filing this legal action brings on so many emotional issues that a counselor may be needed both before and after the action is taken. This can be the reason that one of the requirements for filing is for the debtor to receive counseling from a court approved professional before the process begins. If the question has been asked "What is chapter 7 bankruptcy and what can it be compared to, the answer is the emotional effects of bankruptcy on a person or a family have often been likened to that of the effects of divorce. Anger, blame, resentment, questioning and deep remorse can often plague those seeking this particular legal process and these feelings can last a very long time.
The question of what is chapter 7 bankruptcy can be answered with the word dissolution. This legal proceeding will be the dissolving of a person's assets to repay creditors. And no one should be fooled by the TV attorneys that promise that a person won't lose their house in a chapter seven proceeding. Anyone considering such a legal move should investigate the bankruptcy laws in the state where he lives. There are a minority of states that allow filers of this motion to discharge debts and be able to still live in their homestead. Each debtor filing this legal action can have certain items of property exempted from the trustee's order to sell a person's belongings for debt reduction. However, some states allow as little as four thousand dollars equity to be kept in a house while just a very few don't allow a house to be touched. In most states, very specific possessions are mentioned as being exempt, but the amount of the property exempted can be small and basically the debtor has to start over again.
If the reader is contemplating this action and wondering what is chapter 7 bankruptcy, know that the filing of this legal motion does not end on the day that property will be taken and one must begin again. The debtor will have to wear the scarlet "B" on his credit report for ten years. This proceeding means that the reality of getting loans again during this ten year period will be very difficult and if a person can secure a loan, the interest rate will be astronomical. The person filing this legal motion must understand that the luxuries of life that were bought with credit will not be available the way they were before the bankruptcy. Life really will be different. And if a student has the idea that once all of college has been paid for by federal student loans and the degree has been granted and throwing the mortarboard means also that those loans can be thrown away through chapter seven bankruptcy, think again. Taxes and student loans already against the debtor cannot simply be swallowed up with the gavel of a judge.
What is chapter 7 bankruptcy? Its an opportunity to stop and really figure out life's priorities. Its a chance to decide what will be really important in life and make changes to perhaps live a more simple life. This legal action is an opportunity to find out just how tough a person can be to survive one of life's most difficult periods. What is chapter 7 bankruptcy? Its an opportunity to discover God's great love. "But God commendeth his love toward us in that while we were yet sinners, Christ died for us." (Romans 5:8) Going through bankruptcy doesn't make a person a failure; rather it just means that he's human.
What Is Chapter 13 BankruptcyConsumers seeking debt resolution often ask, "What is Chapter 13 bankruptcy?" Chapter 13 is a legal means of resolving personal indebtedness, preferably when other avenues have been exhausted. Debtors who file petitions have reached a point where monies owed far exceed income or an ability to repay. Some face losing homes, businesses, and prized material possessions that have taken a lifetime to accumulate. Fortunately, for individuals and businesses that face home foreclosures and repossessions, or go out of business due to a lack of capital, the U.S. Bankruptcy court system offers opportunities to legally file financial insolvency. Filings come under Chapters 7, 11, and 13 of the federal law, with the latter being the petition chosen most by debtors who are gainfully employed or have a source of steady income. A Chapter 13 filing, also called a wage earner petition, requires employed individuals to establish a court-ordered debt management plan under which creditors are paid within a three- to five-year period. Those who ask, "What is Chapter 13 bankruptcy may have heard the term "wage earner," but not many debtors are familiar with the process of filing.
A court-appointed U.S. trustee or administrator oversees and distributes the debtor's disposable income to settle secured and unsecured creditor claims. Secured claims are those filed by lien holders of property which can be used as collateral, such as homes, cars, equipment, or inventory. Unsecured creditors can file claims, however since these claims are collateral-free, they are considered secondary. The court defines disposable income as wages or other liquid assets filers receive on a regular basis. Child support payments and assets necessary for the debtor's subsistence are exempt. Distressed debtors who wonder, "What is Chapter 13 bankruptcy?" will get a firsthand look at insolvency when repayment plans are implemented by the U.S. Bankruptcy Court. But, the three- to five-year court-mandated debt resolution plan can actually benefit the debtor in the long run.
When inquiring consumers ask, "What is chapter 13 bankruptcy?" they usually have no idea that the process can be so tedious. Bankruptcy doesn't happen overnight, and debt that was incurred by a failure to make timely payments over a long period of time cannot be easily remedied without a systematic plan to settle delinquent accounts. Trustees are charged with the responsibility of deciding which secured and unsecured claims are to be paid and how much disposable income debtors can afford to contribute to the plan. A chapter 7 petition liquidates debtor assets to settle creditor claims, in compliance with a court-ordered debt resolution plan. But, the question, "What is chapter 13 bankruptcy?" is best answered prior to filing. The federal government is interested in re-educating debtors regarding the fine points of personal financial management before coming to court. Debtors are required by law to attend an approved consumer credit counseling agency within six months prior to filing.
When the question arises, "What is chapter 13 bankruptcy?" many people begin to grow concerned about their financial welfare. However, there should be an even greater concern for the condition of one's soul. And just as financial indebtedness doesn't happen overnight, neither does spiritual destitution. "Because thou sayest, I am rich, and increased with goods, and have need of nothing; and knowest not that thou art wretched, and miserable, and poor, and blind, and naked: I counsel thee to buy of Me gold tried in the fire, that thou mayest be rich; and white raiment, that thou mayest be clothed, and that the shame of thy nakedness do not appear; and anoint thine eyes with eyesalve, that thou mayest see. As many as I love, I rebuke and chasten: be zealous therefore, and repent" (Revelation 3:17-19).
Counseling sessions may convince debtors who wonder, "What is chapter 13 bankruptcy?" that filing is not the best move to make for a particular financial situation. Some indebtedness can be cured by consolidation or debt reduction. Filing chapter 13 bankruptcy, although a commendable effort on the debtor's part to satisfy unpaid claims, also has serious repercussions. Filings remain on credit reports for up to ten years and can have an adverse effect on a debtor's ability to obtain future financing. Debtors should refrain from filing wage earner petitions for consumer debt protection, or from filing chapters 7 and 11, unless every other means of debt reduction or relief have been exhausted. Before taking such a drastic measure to file for insolvency, debtors should consult with consumer counseling agencies to help determine the best method of resolving personal or business indebtedness. Financial counselors can help individuals restructure and consolidate debts before they get out of hand. Businesses can also devise a plan to restructure expenses before fiscal affairs get to a point of no return.
Perhaps the question, "What is chapter 13 bankruptcy?" is one that we all need to ask in order to become more informed and less apt to incur debts that we cannot pay. Insolvency not only reflects poorly on consumer credit reports, but filing can prohibit qualified applicants from securing a good job. Today's prospective employers not only screen for drug and substance abuse, but many also require clean credit records and good scores. An insolvency filing is like a bold, black mark on a consumer record which sends a red flag to a prospective employer, especially in high-security enterprises, such as law enforcement and financing. By studying both the symptoms and the repercussions of filing insolvency, consumers can avoid the headache, the hassle, and the haunting embarrassment of long term financial failure.