Who may File Chapter 7 Bankruptcy
Chapter 7 bankruptcy relief is available to individuals regardless of the amount of their debt and whether or not they are solvent or insolvent. It is not available to partnerships or corporations. Chapter 7 bankruptcy provides an "order of relief" that triggers an "automatic stay" thus all creditors and collectors are prohibited from pursuing one’s property outside of the bankruptcy proceeding.
Reasons People File Bankruptcy
“More than 90 percent of bankruptcy proceedings are voluntary. They are initiated by the debtor, who files a petition with the appropriate federal court” (Encarta Encyclopedia, 2003). Bankruptcy is a legal procedure which can give people who cannot pay their bills a fresh start by discharging all or a portion of their unsecured debts. It is an ideal option for those who owe a significant amount of unsecured debt but have few assets. People also use it as a weapon to stop collection efforts, property seizures, judgments and wage garnishments since an automatic stay goes into effect that prevents creditors and debt collectors from taking any further action against.
How does Bankruptcy Affects Interest Rates on Loans/Credit Cards
Credit card issuers are lobbying to toughen bankruptcy laws to require most bankruptcy petitioners to seek protection under Chapter 13 and thus repay at least some of their debt.
For specific property (usually secured) such as car loan or houses mortgage that one plan on keeping he/she should probably continue to make payments. Also, for day to day expenses such as rent and utilities one should also continue to make payments. One should stop making payments on other old debts incurred prior to the bankruptcy such as credit card debts.....
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