Positive and Negative Aspects of a Chapter 7 in Raleigh, NC
Positive Aspects of Chapter 7:
- Immediately upon filing your petition with the Court, an automatic stay is invoked and Creditors must stop their collection actions against you. This means they cannot call or write you, or repossess or foreclose on your property. In addition, the automatic stay will stop a collections lawsuit if one has been filed against you.
- The principle of a Chapter 7 bankruptcy is that the Debtor is allowed to keep exempted property (usually everything for the average person) to start over.
- The Debtor is no longer held responsible for his unsecured debts, with a few exceptions. Unsecured debt (with exceptions) is discharge. This generally includes credit cards, personal loans medical debt, repos and foreclosures.
- It is rare that any real assets are ever unwillingly handed over in a Chapter 7 if the case is properly planned. Most people do not have any assets to hand over, and they are allowed to keep their exempted property. Normally, all the property that the Debtor owns is mortgaged, has liens against it, or is exempt.
- A debtor is allowed out of contracts. This includes everything from a cell phone contract to a lease or rental contract.
- A debtor’s personal liability for secured debt can be eliminated by surrendering the collateral in the bankruptcy. This means if you give up a secure debt in a bankruptcy, you generally will owe any more on that debt.
- Because Chapter 7 changes your debt to income ratio, most people with poor credit see an immediate rise in their credit score.
- It will also reinstate your driver’s license if you have lost it due to involvement in an accident with too little or no insurance. This immediate action by the Court relieves the pressure on you and your family.
- With some exceptions, such as child support and student loans, most of your unsecured debts are wiped out. This generally includes credit cards, personal loans medical debt, repos and foreclosures. If you properly file a Chapter 7, you will no longer have to repay most insecure debts and your debts will be "discharged". A discharge in bankruptcy means that you no longer personally owe the debts.
However, property that you have given as security may be repossessed if you don’t pay for it, or cosigners may be required to pay the debt. Nearly 100% percent of all Chapter 7 bankruptcies Cameron Bankruptcy Law files are granted. Your goal in a Chapter 7 bankruptcy should be to "exempt" all of your assets so that you can keep all of your property and still wipe out all of your debts. However the trustee will attempt to grab any assets you fail to properly “exempt".
Negative Aspects of Chapter 7
- A debtor can lose any property that is not exempt or can lose exempt property that is not disclosed in the bankruptcy. The Debtor hands over all excess (non-exempt) assets including (but not limited to) bank accounts, tax refunds, inheritances, etc.
- Filing Chapter 7 may damage your credit rating if you had good credit before you filed. (Most people with bad credit actually see an improvement in their credit score because of the change in their debt to income ratio!)
- Chapter 7 does not discharge all debts. Some debts, such as child support, student loans, and most taxes, are non-dischargeable. It also does not discharge as many types of debts as a Chapter 13.
- The rights of secured creditors may not be modified in a Chapter 7. These rights may be modified in a Chapter 13. An exception is that judicial liens and liens on household goods may be destroyed in a Chapter 7 and avoided if you tell your Attorney about them.
- In a Chapter 7, your only options when you want to keep an asset that is collateral for a secured debt are to either make timely payments, redeem, reaffirm, or surrender.
- A Chapter 7 does not protect cosigners and only protects joint property belonging to the Debtor while the Chapter 7 stay is in effect.
- If your income is too high, you may not qualify for a Chapter 7.
- You may only get one Chapter 7 discharge every 8 years. This time period runs from the date of filing (when the first case started) to the date of the new filing. Many people say you can file bankruptcy only once every 7 years, but they are technically wrong. You may file more than one bankruptcy in 8 years, but you can only get one Chapter 7 discharge every 8 years.