Bankruptcy is a generalized term for a federal court procedure that helps consumers get rid of their debt and repay their creditors.
The court can protect you during your bankruptcy proceeding if you can prove that you are entitles to it. In general, bankruptcies can be categorized into two types– liquidations, and reorganizations.
Chapter 7 bankruptcy is one of the most common to file for both individuals and businesses. Chapter 7 normally fall under the liquidation category. That means that if you own property that will usually be used to pay back your debts. These proceedings can act from three to six months.
Both individuals and businesses can file for Chapter 7 bankruptcy. If a business files it is called business chapter 7. If an individual files its called a consumer Chapter 7.
Before you file for Chapter 7 bankruptcy you must be able to show you eligible to file. To be eligible you cannot make enough money to fund your chapter 13 bankruptcy repayment.
In a Chapter 7 bankruptcy proceeding some of your property will be seized and sold to pay off some or all of your debt. However, there is a benefit to this type of proceeding any insecure debt will be wiped out (debts that are not guaranteed by collateral). There is certain property that cannot be sold in order to pay off your debts. The property is defined by federal law and include things like furniture in your home, your car and clothes. People who file Chapter 7 bankruptcy are surprised with all the property they get to actually keep.
In a Chapter 7 bankruptcy proceeding you have to make a choice between allowing the creditor to repossess the property thats secures the debt, continuing to make payments on your debt to the creditor, or paying the creditor a sum equal to the replacement value of the property that secures the debt. Some types of a secured debt can be wiped out during a Chapter 7 bankruptcy proceeding.
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