Chapter 7 bankruptcy is a viable option for Maryland residents who find themselves in overwhelming debt. The prospect of clearing their bills is enticing, however many are reluctant because of the perceived negatives surrounding bankruptcy. From the start, there are key benchmarks that must be met. Once it is determined that a person is eligible for bankruptcy, they should know what comes next.
Understand the benchmarks of a Chapter 7 bankruptcy
A primary reason people choose to file for bankruptcy is to put a stop to the constant pressure from creditors to pay their debts. That includes seemingly endless phone calls, text messages, emails, and letters. Filing for Chapter 7 puts into effect an automatic stay. That means the contact immediately stops. If, for example, a person has medical debt and it has gone to a collection agency, the agency is required by law to stop contacting the debtor. This extends to the creditor no longer being able to call, garnish wages or file a lawsuit to collect.
Next, there will be a meeting of creditors. This happens between 21 and 40 days after filing the petition. The debtor is placed under oath and may need to answer questions about their finances, what property they own and other issues. The trustee is essential to the process. They will look at the debtor’s financial situation and gauge what property they own.
The trustee’s role is integral to a successful Chapter 7 filing. They oversee the case by assessing the assets and, if appropriate, collecting them for the creditors to sell for some level of repayment.
While most people who decide Chapter 7 is the best option for them do not have major assets that could be seized to repay creditors, their property still needs to be assessed to gauge whether the property is exempt or non-exempt. A person who owns a home would be ill-advised to file for Chapter 7 as it would be lost as the assets are liquidated. In general, Chapter 7 is for people who are categorized as “no-asset” debtors meaning they do not own anything valuable enough to be taken and sold.
The debtor’s finances are scrutinized to ensure they are being upfront about their income, assets and property. If fraud is suspected, the trustee will investigate. Non-exempt assets are liquidated. Creditors are also subjected to a level of scrutiny to ensure the validity of the debt.
The debtor must take a financial management course to help with avoiding the same financial pitfalls that might have led to them needing to consider bankruptcy in the first place. Often, a person’s debts were due to job loss, medical bills, and unexpected challenges. Others might have made mistakes in overspending. Regardless, the financial management course is meant to help them in the future.
A Chapter 7 discharge will clear the debts
After completing these steps for a Chapter 7 bankruptcy, the debtor receives a discharge. That means the unsecured debt is cleared and they can move forward. It accords them the opportunity to have a fresh start, rebuild their credit and proceed without the onerous pressure of massive debt causing them fear and worry.
When thinking about bankruptcy, it is vital to understand why its negative perceptions are frequently misinformed. That starts with grasping the entire process and which chapter is best suited to the person’s needs. Seeking guidance can be crucial to a successful filing and should be the priority when dealing with massive debt.