Many people go through financial straits for a variety of reasons, and often those are through no real fault of their own. They just become overwhelmed with debt while having limited resources to apply to their obligations. The result for many consumers in and around the Memphis area is that they must file bankruptcy in order to get a grasp on a new financial future. It is important for those filing to understand how it works and the actual ramifications of filing.
Debt classification for Chapter 7 bankruptcy
The first step in a Chapter 7 bankruptcy is assignment of a trustee who will classify each debt according to priority and determine which assets can be sold to pay towards prioritized debt. These debts begin with tax liabilities and will then extend to delinquent child support payments if needed and any personal injury claims for which the the filer may be liable. Priority debt in the next class is secured debt, which will typically result in repossession or sale to pay the particular creditor. The last step is discharging or reconstructing repayment plans for any remaining unsecured debt.
Ramifications
There are some negative aspects of filing a Chapter 7 petition for bankruptcy protection. The first is that not all debt is subject to being discharged, so repayment may still be required. Even though outstanding creditors have no legal authority to do so, they may still attempt to recover funds after the bankruptcy proceeding is completed. Filers will also have the bankruptcy recorded on their credit history for a period of 10 years, and they cannot file again for the eight years following an accepted petition.
These stipulations mean that filing Chapter 7 bankruptcy is a very serious decision for all who make the choice, if they even have a choice. Creditor unwillingness to negotiate a compromise could effectively lead to a necessity to file for many petitioners. However, once the process is completed, debtors can obtain a fresh financial start.