Know how Chapter 7 Bankruptcy deal with small businesses debt . . .

By: Jim Knight | Posted: 23rd March 2010

Chapter 7 Bankruptcy allows you to eliminate most common types of unsecured debts. Unsecured debt can include : credit union loans, finance company loans, bank loans, medical bills, and credit card debt. Other things that chapter 7 bankruptcy can help you eliminate are unsecured debts from divorce, failed businesses, personal guarantees, trade creditors, and some income taxes over 3 years old . There are also other unsecured debts that can be eliminated using chapter 7 bankruptcy.

With Chapter 7 Bankruptcy not only do you eliminate the debt and any obligation to pay it back, but you also relieve yourself of any interest owed to the companies as well. As you probably know from your own experience the interest was all you were paying anyway, relieving yourself with chapter 7 bankruptcy will help you lower monthly payments. Lowering the amount of your payments and eliminating some of them completely will bring your monthly payments back under your control again.

You may be asking yourself how this is possible, and the answer to this is that the US congress decided to give people a second chance . The idea is that congress did not want to discourage citizens that found themselves in financial trouble , because discouraged citizens will become unproductive when they realize they can no longer work themselves out of debt .

When you file bankruptcy you do not lose all of your property like many people think . When filing bankruptcy there is a list of State and/or Federal exemptions. These exemptions allow you to keep certain things based on what exemptions the state has in place. For example, in Texas your personal property such as your home , mobile home , land, cars or trucks, and more. Rarely people will have too many personal belongings to be covered under chapter 7 bankruptcy, if this is the case you have the option to file chapter 13 bankruptcy. Chapter 13 bankruptcy does cost you more, but you get to keep more.

What about property you no longer want to pay for or own? Chapter 7 can help with that too! Certain pieces of property can be surrendered back to the lender and then in most cases once your chapter 7 or 13 bankruptcy is over you no longer owe or own the piece of property.

Last but definitely not least is the ability of bankruptcy to stop lawsuits and harassment by creditors. The automatic stay is a powerful part of bankruptcy that will put a stop to the annoying harassment by creditors. As soon as you file for bankruptcy you will receive bankruptcy protection that will keep these phone calls from coming in. A court order is sent out to all of the creditors letting them know that they need to leave you alone. This court order as mentioned above is called the automatic stay.

If a creditor decides not to comply with the automatic stay the bankruptcy court has the authority to hand down some pretty severe punishments. Creditors know that these punishments can be issued to them so they usually comply with the automatic stay immediately . If the creditor does feel that they have the right to take some form of action against you, like repo your car , they have to get it cleared by the court first.

The automatic stay does end when your bankruptcy case is over, but by that time bankruptcy should have eliminated enough debt that you will not be getting anymore harassing phone calls.


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Tags: second chance, chapter 13 bankruptcy, chapter 7 bankruptcy, filing bankruptcy, finance company, medical bills, personal property, credit card debt, personal belongings, unsecured debt, unsecured debts, income taxes, bank loans, financial trouble, us congress