Chapter 7 bankruptcy is a legal tool that people use when they need a way out of debt. Bankruptcy is not the only way out of debt, but it works well for many people. Before using it, you should learn as much as you can about it. You might also want to research the consequences of filing for this branch of bankruptcy. Here are some of the ways a Chapter 7 case will treat your debts when you file.
The Court Will Forgive the Debts
When you file your case, you will have to list every debt you have. Bankruptcy affects different debts in various ways. For example, the court will discharge some of them. If you owe money that qualifies for a discharge, the court will forgive the debts. Credit card debt is one of the most common types of debt that Chapter 7 cases forgive. Chapter 7 cases may also forgive other debts, but the debts must qualify for forgiveness. When you meet with a lawyer, they will look at all your debts to see if you have any that the court will discharge.
The Court Will Require Reaffirming Your Debts
The second thing that can happen to your debt is you can reaffirm it. If you owe money to a mortgage lender or car loan lender, you might want to keep the house or car. If you want to keep the assets that go with the debts, you can use the reaffirmation process to do this. Reaffirming a debt allows you to keep the asset, but it requires that you continue paying the debt payments as usual. If you fail to make the required payments after filing your case, you risk losing the assets tied to the debts.
The Court Will Do Nothing
You might also have debts that the court will not discharge, but these debts will not require reaffirmation agreements. For example, do you owe money to the IRS for back taxes? Do you owe past-due child support payments? When you owe debts like these, the court will do nothing with them. Instead, you must pay them yourself, and you will have to pay 100% of the money you owe.
Your lawyer can help you understand how filing for bankruptcy will affect the debts you have. If you have more questions regarding bankruptcy or how it will affect you, contact a bankruptcy attorney and schedule a consultation.