When Kentucky residents are confronted with overwhelming debt they cannot pay and are feeling pressure from creditors and debt collectors, they are frequently unsure of what they can do to get into a better financial position. For many, bankruptcy is an untenable option because they have a misguided perception about it in that they think they are shirking their responsibility to pay their debts. Another concern is that they will lose all their property and be left with nothing. Those who do not own significant property and owe unsecured debt like medical expenses and have massive credit card bills could benefit from a Chapter 7 liquidation. Understanding how this impacts property can assuage fears about the process.
What generally happens to property in a Chapter 7
The term “liquidation” is frightening to some, generally because they will take it literally and think their property will be taken and sold off to pay back creditors. However, that is not often the case. People who file for Chapter 7 do so because they do not have substantial property, so there is nothing worthwhile to take and sell. Those without assets will have a “no-asset” case. Unsecured creditors will only receive repayment if there are assets and a proof of claim is filed.
The benefit of Chapter 7 is that people will not have property of value and the debts will be cleared once the case is approved. This is known as a discharge and it happens relatively quickly for most cases – within several months. With that, medical debt, credit cards and other unsecured debt will be gone. Financial challenges are a growing concern given the current health crisis with people accruing major medical expenses, losing their jobs, facing eviction and needing to use savings and credit cards to make ends meet. Chapter 7 could be a solution.
Having legal guidance can be crucial for debt relief
Of course, not all cases are the same. In some instances, a Chapter 7 liquidation is not the best possible option. A Chapter 13 wage earner’s bankruptcy will essentially consolidate the debts and a monthly payment will be made to a trustee for three to five years. Payments will then be distributed to creditors. This allows the debtor to retain various properties and eventually clear their debt. There may be other ways to get on stronger financial footing in lieu of bankruptcy.
After successfully completing a bankruptcy whether it is Chapter 7 or Chapter 13, people may be surprised at how quickly they can rebuild their credit. For advice and representation, consulting with a firm that understands all areas of bankruptcy and debt relief can be beneficial.