Filing for Chapter 7 Bankruptcy: What You Can Expect

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chapter 7 bankruptcyFor many people, the most daunting and frightening thing about filing for chapter 7 bankruptcy is not driven by what they know about the process, but rather about what they do not know. That is, they do not know what to expect — and so they fear and dread the worst.

To alleviate this anxiety, here is a general overview of what you can expect if you move ahead with a chapter 7 filing:

Pre-Bankruptcy Credit Counseling Course

Before you officially file with the court, you must complete a pre-bankruptcy credit counseling course. This course is delivered by various providers around the country, which are approved by the Department of Justice (or at the state level in Alabama and North Carolina, respectively) The course can also be taken online. Enrollment fees vary, but are typically below $50 (and some online courses are less than $20).

How Chapter 7 Bankruptcy Works for Debtors and Creditors

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chapter 7 bankruptcyOne of the most misunderstood topics in the financial world is how chapter 7 bankruptcy works for debtors and creditors. Unfortunately, this misunderstanding is not minor (like one of those passionate debates about whether the 1927 New York Yankees were statistically the best baseball team of all time, etc.). On the contrary, confusion around how chapter 7 bankruptcy impacts debtors and creditors is costly and stressful. 

How Bankruptcy Works for Debtors

Filing for chapter 7 bankruptcy (a.k.a. “liquidation bankruptcy”) will essentially wipe out most debts that were incurred prior to the filing (exceptions include child support obligations, court-ordered restitution, etc.). All non-exempt property, such as savings that are not part of a registered retirement vehicle, will be transferred to the court-appointed bankruptcy trustee, who undertakes a structured and transparent liquidation process. Proceeds are then distributed to creditors based on a pre-set amount (e.g. $0.50 for every $1 owed, etc.).

3 Ways to Turn a Bankruptcy Filing into an Unmitigated Disaster

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filing for bankruptcyOne of the biggest and most daunting challenges of filing for bankruptcy, is that most people who make this decision are typically under severe stress — which, as any psychiatrist or psychologist will tell you, is not the ideal time (to put it mildly!) to make major life decisions.

However, the fact remains that people who file for bankruptcy typically do not have time on their side. They are facing an unsustainable debt scenario, and their creditors are unwilling to negotiate or compromise. On the contrary, their creditors are likely dialing up their aggressive collection tactics, in the hopes that debtors will get so emotionally exhausted that they throw in the towel, and just pay up to make them go away.

How Will Filing for Bankruptcy Impact Your Credit Score?

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filing for bankruptcyObviously, understanding how a bankruptcy might impact your credit score is critical information that you need to know before you (potentially) make this major decision — not after. Unfortunately, this is also one of the most misunderstood and misinformed topics in the financial world.

Why is this the case? It’s because some firms in the credit counseling and debt consolidation fields are on a mission to prevent people from filing for bankruptcy — not because they have their clients’ best financial interest in mind, but because they have their OWN financial interest in mind. In other words: they don’t (and can’t) help facilitate and support a bankruptcy filing. And a major way they generate new business is, basically, by trying to terrify people from filing for bankruptcy.

Senior Citizens: Is Filing for Chapter 7 Bankruptcy the Right Decision for You?

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chapter 7 bankruptcyThe belief that debt is a “young person’s problem” is a myth. Across the country, thousands of senior citizens are facing large debt loads due to a variety of reasons, such as excessive medical costs, decreasing pensions, investment losses, and in some cases, misappropriation by fraudsters who prey on elderly victims, and the list goes on.   

If you are a senior citizen who is concerned about substantial and unsustainable debt, then here are some key facts that you need to know about potentially filing for chapter 7 bankruptcy:

  • Filing for chapter 7 bankruptcy will wipe out most of your debts, including your medical debt (provided that it is not incurred after you file).