Frequently Asked Questions

There are two types of bankruptcies that apply to most general consumers – a Chapter 7 liquidation and
Chapter 13- reorganization.

A Chapter 7 bankruptcy is titled liquidation under the United States bankruptcy code. A Chapter 7
( liquidation) is typically associated with debt elimination. It is a great tool to allow financially
overwhelmed consumers to start financially anew. Most generally, the chapter 7 is associated with the
elimination of debt to allow a fresh start. When filing a bankruptcy, in addition to disclosure of debts, all
assets must be revealed to the court. Before the debt is eliminated, the consumer must reveal the
approximate worth of their assets. If the consumer does not have any assets worth liquidating, or selling,
debt are eliminated. There are some classes of debt that survive a bankruptcy. There is an allowance of
personal property that consumers are generally allowed to retain under a Chapter 7. This allowance is
typically referred to as an exemption. This exemption , if allowed, acts as a protection from liquidation.

Yes, traditionally a Chapter 7 bankruptcy will stop a wage garnishment. Once a bankruptcy is filed, an
automatic stay goes into effect. The automatic stay prevents creditors from proceeding with collection
actions, including wage garnishments.

It is possible that a bankruptcy may actually assist with improving one’s credit after a period of
rebuilding. If one has many open accounts that are maxed out, the credit score is negatively
impacted. A Chapter 7 bankruptcy clears the balances to zero allowing a consumer to commence the
process of rebuilding

A Chapter 7, liquidation, is the bankruptcy most generally affiliated with elimination of debt allowing
consumers a “fresh start”. A Chapter 13 bankruptcy is a reorganization of the debt. It acts as a court
supervised debt consolidation that provides for repayment of debt, customarily, over the course of a
period between three to five years.

A Chapter 7 is not the advisable bankruptcy choice to stop a foreclosure. Ideally, a Chapter 13 is
recommended to stop and address the arrears affiliated with the foreclosure. The Chapter 7 does provide
relief through an automatic stay to all creditors at the time of filing. The mortgage lender is not exempt
from the automatic stay. However, because the mortgage lender is not receiving mortgage payments, it is
customary that the lender do a motion for relief from automatic stay. This relief from the automatic stay
allows the creditor to resume collection activity and continue the foreclosure process (or a judicial sale).

If a discharge was entered in the prior Chapter 7, another Chapter 7 cannot be file until eight years after
the initial filing.

Yes, absolutely. Bankruptcy is designed to provide relief for debt that may have grown
overwhelming. Once the debt is discharged, the rebuilding process begins. After a period of rebuilding,
some of our clients have reported reaching credit scores exceeding 700.
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