Filing Chapter 7 Bankruptcy

A bankruptcy starts with the filing of the official petition, schedules and Statement of Financial Affairs with the bankruptcy court. In order to complete the Bankruptcy Forms, you must provide a list of all of your creditors and the amount and type of their claim; the source, amount, and the frequency of your income; a list of all of your property; and a detailed list of your monthly living expenses.

As soon as you file for bankruptcy, your creditors are prevented from trying to collect on your debts through what's called an "automatic stay." The stay is designed to preserve your property and to give you a break from litigation.

A creditor must show the bankruptcy judge, after a hearing, that there is "cause" for the creditor to be allowed to continue with collection action (for instance, by showing that the property might deteriorate in value during the bankruptcy period).

If there is property that isn't exempt, the trustee takes control of it. From the sale of your property, the trustee pays the expenses of the administration of the case, and then gives any remaining money to creditors with allowed claims, according to the priority of the claims. Any wages you earn after you file the case are yours, beyond the reach of creditors who had claims on the date you filed for bankruptcy.

 

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