Breaking Down The Basics of Chapter 7 Bankruptcy

When most people think of bankruptcy what they’re really thinking about is Chapter 7 bankruptcy. This is the kind of bankruptcy where your assets are liquidated in order to pay of your debtors. You may have visions of your head regarding what this entails and how it truly affects people, like loosing their house, loosing their credit, and starting from zero again. These are all true about filing under this chapter but by breaking down the terminology, you can get a clear sense of what you’re in for if you decide to file for bankruptcy under this chapter.

Assets are things that you have that are worth money, including money itself. What you have in the bank and in investments are assets. They are also things that you own, like your car and your house. When talking in terms of Chapter 7 bankruptcy, what an attorney assess and what the federal courts will look at Liquidation means turning physical property and financial investments into the most liquid form of asset, which is cash money.

Liquid means that it is the most immediate form of payment. Think of the difference between checks and actual money. A check is a promise that you have the money and one could then cash your check for actual money. If you give a vendor or person actual money, it is considered more liquid. A house, even though it may be worth a lot of money, is a very non-liquid asset. It cannot be converted to cash very fast.

The process of liquidating your assets helps to pay off your creditors immediately. This means that everything you owe, be it credit card debt, loan payments, or mortgages are instantly paid off so that you are no longer responsible. This can be a very emotional thing to go through because all of your valuables and long term investments are literally eliminated in order to pay off your debts.

It is also important to know that when you file for bankruptcy, your record is not completely clear. Your credit rating will be affected for a number of years. You will be able to earn back a good credit rating however. Through small to moderate loans, well balanced and paid credit cards, and regularly paid bills, you can prove once again that you can be a financially stable consumer of goods and services.

Chapter 7 bankruptcy, as all other chapters to file under, requires legal representation from a lawyer, preferably one that specializes in this legal field. When you file for bankruptcy you do so with the federal courts. If you think this is the only possible way out of your debt, then it is available for you to petition for. If you qualify, it could help save you hears of worry and anxiety.