What Happens when a Person files for Chapter 7 or Chapter 13?

Thousands of Americans file for bankruptcy every year. Many declare personal bankruptcy in the state of California and get a fresh financial start. It’s only natural to be curious as to what even happens when a person files for bankruptcy.

Bankruptcy helps those who have gotten in over their heads. Generally, some believe that if a person owes more than they can make in a year, they may want to file chapter 7 or 13. Chapter 7 is the most common type of personal bankruptcy filed in the country. In this kind of case, the court appoints a trustee who will sell off the filer’s unprotected in order to pay off his or her loans.

Those who have a steady income and can make payments to keep their possessions may want to file a Chapter 13. While Chapter 7 allows a person to keep just enough to work and survive, Chapter 13 makes it possible for the client to keep much more of his or her possessions and possibly a reduction in what they owe in their homes and cars.

Then, once a person files bankruptcy, the automatic stay generally goes into effect. Once the paperwork is filed, no one can collect for unpaid bills. The creditors are not allowed to contact the bankruptcy filer by phone; meaning, no more nasty letters and no more threats of lawsuits. Unfortunately, any type of bankruptcy will be on the filer’s credit report. For anyone whose credit is not already struggling, this can be a disappointing outcome. If your credit is struggling, there is a possibility that a bankruptcy filing can improve your score.

While bankruptcy can stay on a credit report for several years, many end up with a higher score after it is all over. Those who are considering Chapter 7 or 13 bankruptcy in California may choose to consult with an experienced bankruptcy attorney. I can provide guidance in which type would be best for his or her needs, and how and when to file the proper paperwork.