Chapter 7 Bankruptcy is also commonly referred to as the “fresh start” bankruptcy. Chapter 7 is the most commonly filed consumer Bankruptcy in Minnesota for several good reasons. Immediately after you file a Chapter 7 you’re protected from any creditors trying to take property that secures a debt. Creditors are prohibited from obtaining a judgment for unsecured debt that can be turned into a lien against your property. You also get the option to keep any property that secures a debt or give it up to your creditor without having to pay them. Chapter 7 Bankruptcy can really give you some comforting power over your creditors. Here’s how:
Your Creditors Can’t Take The Property You Own
Immediately after you file a Chapter 7 Bankruptcy in Minnesota your creditors are prohibited from taking any property you own that secures their debts because of what is called the “automatic stay.” The automatic stay is a federal law that not only prohibits a creditor from taking your property but also any collection activity at all. Under the U.S. Bankruptcy Code Section 362(a)(3) and (5) it states that filing a bankruptcy petition operates as a stay, applicable to all entities, of -
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title
In simpler terms, your creditors can’t take possession or control over your property or put a lien on it while the automatic stay is in effect. The automatic stay is in effect until your case is discharged, which usually takes about 4 months.
Your Creditors Can’t Obtain a Judgment Against You
Not only does the automatic stay protect you from your creditors trying to take your property, the automatic stay also prevents a creditor from enforcing a judgment or obtaining a judgment. When creditors obtain a judgment, the judgment can be “docketed,” and once docketed, the judgment, even if it is for an unsecured debt, can become a lien against property that you own. Filing a Chapter 7 Bankruptcy prevents unsecured creditors from going to court to obtain a judgment against you. And if there’s been a judgment entered against you, filing a Chapter 7 case prevents the creditor from acting on the judgment.
You Get To Keep Your Car or House
Another one of the Top 3 Advantages Of Chapter 7 Bankruptcy can also help you to keep your house or car even if you’re behind on your payments. However, if you are behind on your payments, your lender will typically only give you a limited amount of time to get caught up. But after you file your bankruptcy you don’t have to pay back your unsecured creditors anymore. This frees up your pocketbook making it a lot easier to catch up on overdue house or car payments. If you absolutely can’t get caught up on your payments in some situations you can talk to your lender about re-negotiating the payment terms of your contract. Usually, if you talk to them before you file they are more willing to work with you in order to alter your monthly payments, reduce your principal balance or negotiate a lower interest rate. Ultimately if you are completely current on your payments, you’re in a great position. When you have an account that is in good standing and you continue to make your payments, losing your property won’t even be the least bit of concern. No creditor is going to be unhappy or even care if you file bankruptcy as long as they’re getting paid.
You Can Give Up Property You Don’t Want Without Penalty
Lastly filing a Chapter 7 Bankruptcy can also give you an easy out on property that you simply can’t afford, need or want any more without owing any debt on it or being penalized by owing a deficiency to a secured creditor after the property is surrendered and ultimately sold. When you surrender property to your creditors they take it and liquidate in order to pay your balance due. However, even if they can’t make enough money to pay your balance in full the rest of the debt owed still gets wiped clean. Forever. Tax Free! Plus, filing bankruptcy protects you from getting sued by them for the remaining balance. If you don’t file a bankruptcy, this is not the case, and creditors can pursue a deficiency judgment against you.
To learn more about how Chapter 7 Bankruptcy can help you download Kain & Scott's Free Debt Solutions 101 EBook. Inside our Bankruptcy Lawyers MN explain all of your Bankruptcy options in order to help you be able to make the best choice for you!