Few people want to enter into bankruptcy, but their financial situations make avoiding proceedings challenging. When someone can’t pay obligations, and the financial pressure proves crushing, heading to bankruptcy court to sort things out seems logical. Each candidate for bankruptcy must review his or her eligibility for a particular chapter. Many New Jersey residents file for Chapter 7 bankruptcy protection since it focuses on discharging the unsecured debt.
Chapter 7 explained
Chapter 7 refers to liquidation bankruptcy, a process that does not involve devising a payment plan with creditors. Payment plans fall under the Chapter 13 bankruptcy category, and those unable to make payment arrangements may opt for Chapter 7.
With Chapter 7, some assets, if any, face liquidation to pay some debts. The remaining unsecured debt ends up discharged. That means the debtor no longer has any obligations to pay. For some, the discharge component might be Chapter 7’s most valuable trait. Keeping certain assets even during bankruptcy could be another plus.
Be aware “means testing” factors into the bankruptcy process. The courts will review someone’s financial status, debts, income, assets, living expenses, and more to determine if someone is eligible to file for bankruptcy.
Other perceived benefits to Chapter 7 bankruptcy
Chapter 7 bankruptcy filers might find other benefits beyond the debt discharge. Among the most appreciated features would be the cessation of collection action. Once someone files Chapter 7, creditors no longer deal with the debtor. Any harassment or similar behavior could land credits in trouble with the court.
Chapter 7 opens doors for a fresh financial start. Once bankruptcy ends, the former debtor could work on rebuilding a credit score and developing a budget.
An attorney may help clients considering filing for Chapter 7. The attorney could organize financial records and present them to the court.