Macco & Corey P.C.

An overview of how Chapter 7 bankruptcy works

An overview of how Chapter 7 bankruptcy works

Even though the national economy has rebounded nicely in the last few years and the stock market is regularly reaching all-time highs, the unfortunate reality is that there are still millions of Americans who are facing difficult financial challenges every day. For some, the most pressing concern is overwhelming debt. That is where Chapter 7 bankruptcy could help.

Chapter 7 bankruptcy is intended to be a tool for consumers to use to discharge debt, face their financial challenges and get a fresh start. However, New York residents who are interested in pursuing this tool must first determine if they are eligible. There are certain restrictions on who can file for Chapter 7 bankruptcy. For instance, a person who has filed for bankruptcy recently is not eligible to file again. Debtors are also required to attend credit counseling prior to filing for bankruptcy.

But, when New York residents believe they are eligible for Chapter 7 bankruptcy, they may file a petition with the bankruptcy court. The debtor is required to submit a list of assets and liabilities, as well as a list of all sources of income and all financial obligations. When the petition is filed, an “automatic stay” will go in effect, which prevents creditors from contacting the debtor in an attempt to recover debts.

Assuming everything goes as planned, all of the appropriate types of debt will be discharged in the Chapter 7 bankruptcy filing. This will likely include credit card debt and many other types of loans, such as car loans or personal loans.

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