1. Home
2. Bankruptcy Articles
3. When to File for a Chapter 7

Bankruptcy Articles

Thursday, November 13th, 2008

by Theodore Sliwinski, Esq.

When to File for a Chapter 7

A chapter 7 is a legal process that provides debtors, which  includes both people and and businesses that are unable to pay their creditors, an opportunity to wipe out their debts. The bankruptcy process is designed to help an honest debtor to obtain a fresh start. Whether it is chapter 7 or reorganization under chapter 13, the bankruptcy process provides real debt relief, and it can help you regain control of your life.

An important question for most debtors is what is the right time to file for bankruptcy? Filing for bankruptcy should not be taken lightly, or filed on a “whim of the moment” decision. Moreover, the decision to file for bankruptcy should only be made after you have carefully considered all of the other types of bankruptcy alternatives. Chapter 7 is best used when a person can’t realistically expect to settle their credit card debt with a work out deal. Many credit card companies will settle their debt for a 50% payment. However, this settlement payment must be made in one lump sum, or the credit card companies won’t accept any deal.

If the bankruptcy means test determines that you are eligible to file for a chapter 7, then you can usually wipe out all of your unsecured debt. Filing for bankruptcy under a  chapter 7 works extremely well when you need to wipe out massive credit card bills, personal loans, medical bills, payday loans, car accident cases, lawsuits, collection judgments, leases, certain taxes, car repo and mortgage deficiencies, personal guaranties, and almost every other type of unsecured debt(s).

A chapter 7  is also commonly known as “straight bankruptcy” or a liquidation bankruptcy. In this type of case, the  trustee will sell any of your non-exempt assets to raise money. These funds are then used to pay off your creditors on a pro rata basis. In most chapter 7 cases the debtor usually is entitled to keep all of his property. TheState of New Jersey allows debtors to retain a very generous amount of their personal property. A debtor is permitted to retain his property by claiming his bankruptcy exemptions. Unfortunately, a chapter 7 does not discharge all of your debts. Child support can’t be discharged in a chapter 7. Student loans can’t be discharged either. Moreover, certain types of taxes are not dischargeable in a chapter 7 either. An important consideration when you have decide whether to file either a 7 or a 13, is that your mortgage and car payments have to be current if you decide to file for a chapter 7. For many New Jersey-ites a chapter 7 is the best way to wipe out credit card debt, and to keep most all of their property.

If you are struggling with massive credit card debt, and if you  have been struggling for some time now, then you should consider all the famous Americans who have also filed bankruptcy to escape their massive debt. You are not alone! You don’t have to be famous to obtain a fresh  start in bankruptcy.  If you are eligible to file chapter 7 under the bankruptcy means test, then you can eliminate your credit card debts, medical bills, payday loans, and obtain a fresh start!

Do you want more information on a chapter 7 ? Bankruptcy is often a mystery to most New Jersey-ites because it is not a regular everyday occurrence. Although they may occasionally hear about bankruptcy in the news, most people in New Jersey consider filing bankruptcy when they are facing some type of financial disaster or if they have had massive debt problems that need to be addressed. If you can’t sleep at night because you are worrying about paying off your credit cards, or if you can’t answer your phone for the fear that it is a debt collector, then you must consider filing. To see if filing bankruptcy is right for  you  please contact the New Jersey Bankruptcy Center for your free consultation.