Why do debtors file for Chapter 7 Bankruptcy
Do you have debts that are difficult pay? If so, you may not have any option other than filing for bankruptcy. A lot of people like file Chapter 7 Bankruptcy. This chapter involved selling all your properties that are not exempted that will be a chance to pay all your debts. This chapter is supervised by the authority and the court will appoint a a person known as a trustee to get sales from all the non-exempt assets of the debtor and use the sales proceeds to repay the various creditors. Exemptions means that there are assets that the creditors cannot touch when filing for bankruptcy. Chapter 7 bankruptcy is usually preferred by debtors but not the creditors and with the law of exemptions, you can have a chance to reduce their personal liability and you don’t have to sell everything.
In this exemption the debtor selects property that he/she is entitled to keep from a list containing state exemptions or exemptions provided in the Federal Bankruptcy Code. All the property of the debtor will be divided as exempt or non-exempt once the trustee files a property exemption report. The exemptions are not across the board and the law can be very different in some states, but the basic laws should remain the same.
In paying off the debts, the secured debts are paid first. As for unsecured debts, there may be a situation that the creditors may not get the money in full. The trustee is authorized to decide who gets the payment first, based on the law. Note that to enjoy the benefits of bankruptcy chapter 7 exemptions, the debtor must file the case in the state where the debtor resides for a period of 730 days before filing for this type of bankruptcy. Or the defaulter may also file the case in a state where the debtor has spent most of the 180 period prior to the 2-year period.
There are also the Federal exemptions which will cover retirement benefits, death disability benefits, survivor’s benefits and miscellaneous. Remember that in some states, not all the benefits are available.
No one like bankruptcy. It takes away a lot of things in your life and, your credit score may take a major hit because there is a bankruptcy filing. You will lose all your personal belongings and you need start all over again in your life. Always consider other options before you look at bankruptcy.
However, if in a worse case scenario, then remember to educate yourself about bankruptcy chapter 7 exemptions that can help reduce your loss and make use of it in a way to help get back on your feet at the earliest.