In many respects, Chapter 7 (also known as liquidation) can be the quickest way to accomplish the purpose of bankruptcy, which is to turn a financial crisis into a fresh start. All valuable assets are transferred to a trustee, who oversees their sale and distributes the proceeds to the creditors.
In addition to the petition, the debtor must present the court with a complete inventory of assets and liabilities, records of current income and expenditures, a current statement of financial affairs, and any active leases or contracts.
The estate of a person who petitions for bankruptcy is protected by a ""automatic stay"" This stays in effect as long as your bankruptcy proceeding does and prevents creditors from attempting to collect on any debt unless authorized by the court. A few of the advantages of an automatic stay include protection against eviction, vehicle repossession, and foreclosure.
Regarding your other assets, you have likely heard the terms ""secured debts"" and ""unsecured debts."" A'secured creditor' is a lender whose loan is backed by collateral; if the debt is not repaid, the collateral may be repossessed. Typically, after the secured debts are settled in a Chapter 7 proceeding, the unsecured debts (those for which there is no collateral and, consequently, no risk of loss, such as credit card bills) are discharged. In cases where the debtor has no valuable assets, the time between filing and debt relief can be as short as a few months, and Chapter 7 cases with significant assets rarely last longer than six months.
Keep in mind that there are debts that cannot be discharged, such as child support, delinquent taxes, and student loans. Other non-dischargeable debts include those incurred from the purchase of a luxury item within the two months preceding the bankruptcy petition.""
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