When an individual files for bankruptcy (Chapter 7, Chapter 13, or Chapter 11), all of his or her creditors are immediately barred from attempting to collect the debt. This is known as a """"automatic delay."""" This means that filing for bankruptcy promptly stops creditor harassment, including annoying phone calls, lawsuits, repossessions, foreclosures, and any other form of debt collection.
Similarly, a creditor may initiate wage garnishment proceedings against you prior to filing for bankruptcy in order to seize 25% of your wages. The creditor automatically ceases wage garnishment proceedings upon the filing of a Chapter 7 bankruptcy. Similarly, your finance company can be immediately prevented from repossessing your vehicle. These are all examples of the """"automatic delay"""" of bankruptcy.
CHAPTER 7 SUMMARY
Chapter 7 bankruptcy is sometimes referred to as a """"liquidation"""" or """"clean"""" bankruptcy. In Chapter 7, a business or consumer debtor receives a """"discharge"""" of all debts after a court-appointed Bankruptcy Trustee liquidates the debtor's assets to pay creditors or determines that the debtor has no assets to pay creditors. A discharge is an order from the bankruptcy court releasing the debtor from obligations such as credit card bills. In other terms, the debt is discharged and the debtor no longer owes any money to the creditor.
In the majority of consumer cases, there are no assets to investigate or administer. This is due to the fact that the majority of consumers possess exempt assets under California law. Under California law, you may exempt your furniture, jewelry, and apparel, among other items.
In Chapter 7 bankruptcy, if you wish to and are current on your monthly payments, you may retain your vehicle. Alternatively, you may surrender your vehicle if you so choose, and you will be released from all obligations to your finance company.
Within 180 days of filing for bankruptcy, you must now obtain a briefing from a nonprofit credit counseling agency that has been approved under the new bankruptcy law. Under the new bankruptcy law, you will be ineligible to file for Chapter 7 bankruptcy if your income is greater than the state's median income and you can pay a certain amount of your debts. Additionally, a Chapter 7 debtor's discharge will be denied if the debtor received a Chapter 7 or Chapter 11 discharge in a prior case filed within the previous eight years.
A Chapter 7 bankruptcy does not permit you to create a repayment plan for your creditors. If you are behind on your mortgage payments and wish to ""cure"" or make up payments to the mortgage company, you must file for Chapter 13 bankruptcy.
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