Posts made in May, 2016

The Many Benefits of Chapter 7 Bankruptcy

»Posted by on May 25, 2016 in Bankruptcy | 0 comments

Among the worst effects of the Great Recession of 2008-09 were mass lay-offs, underemployment, prolonged unemployment and reduced pay. These resulted to financial crisis to millions of Americans and forced majority of those affected to live a more moderate or modest lifestyle.

Doing away with whatever little extravagance millions of individuals enjoyed was not all these people had to let go, however. Due to the mounting bills and debts that they are no longer able to pay, such as mortgage payments, car loans, personal loans, credit card loans, etc., thousands also faced (and actually) lost their home or car because of repossession, while thousands of others suffered stress as they worried about their debts, and the hounding and humiliating tactics employed by collecting agencies to make them pay their debts.

There is a way, though, for debtors to pay and free themselves from debts and have a brand new start at their financial life: Chapter 7 Bankruptcy.

Chapter 7 is just one of the many chapters in the Bankruptcy Code, a law that the U.S. Congress passed in 1978. Otherwise known as Liquidation Bankruptcy, Chapter 7, as explained in detail on the website of Ryan J. Ruehle Attorney at Law, LLC, “offers the near-total liquidation of all debts that an individual may hold, giving those who pursue this option the ability to start their financial life anew.”

The immediate benefit of Chapter 7 Bankruptcy, once it is filed in court, is the cessation of all forms of harassing tactics used by collecting agencies (including phone calls, text messages, emails, letters, etc.). This benefit is called the “automatic stay,” “an automatic injunction that halts actions by creditors, with certain exceptions, to collect debts from a debtor who has declared bankruptcy. Under section 362 of the United States Bankruptcy Code, the stay begins at the moment the bankruptcy petition is filed.” https://en.wikipedia.org/wiki/Automatic_stay

An automatic stay also protects debtors against creditors who may: try to obtain a debtor’s property through a court injunction; request the court to issue a wage garnishment and/or bank account levy order; or, begin or continue any judicial proceedings against the debtor.

Through Chapter 7 Bankruptcy, a court may totally free a person from all of his or her unsecured debts, which includes personal loans, credit card debts, medical bills, past due utility bills, repossession deficiency balances, business debts, personal loans (from friends, family, and employers), student loans (under certain circumstances), money owed under lease agreements (including past due rent), tax penalties and unpaid taxes (due dates of these should be more than 3 years), and collection agency accounts.

There are also debts which cannot be discharged. In fact, unless due to totally reasonable circumstances, these debts will have to be paid even after Chapter 7 bankruptcy has been declared. These debts include spousal and/or child support, taxes, debts owed to tax-advantaged retirement plans, and student loans (with some exceptions).

While Chapter 7 may truly be beneficial, a person will first have to pass a test in order to get protection from this bankruptcy chapter. The Means Test, which is an evaluation method based on an applicant’s personal income, will determine if a person is eligible to file for this chapter.

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