Who Files for Chapter 7 Bankruptcy and Why- What About Loans and Credit Cards?

The chapter 7 bankruptcy code allows for individuals, partnerships, and corporations to file, regardless of whether their debt is solvent or insolvent (Federal Judiciary, n.d.). Those who file Chapter 7 bankruptcy are looking to liquate their non-exempt assets. You cannot file for bankruptcy if you have enough income to pay your bills. You must meet with a credit counselor before you are allowed to file for bankruptcy.

People usually file for bankruptcy when they have accumulated so many bills they are incapable of keeping up with the payments or paying them all off. It offers someone burdened with a large amount of debt a chance to start over. This can sometimes be due to unexpected medical bills, job loss, divorce or other events that they never saw coming.

Most credit cards will cancel you account if you file for Chapter 7 bankruptcy (BankruptcyAction.com, 2005)Chapter 7 bankruptcy remains on your credit history for ten years and will reflect negatively upon anyone trying to receive loans or credit cards. Secured credit cards are usually the only type of credit card people who file Chapter 7 bankruptcy can hope to obtain. After two year has passed following the bankruptcy, debtors can obtain mortgage loans comparable rates to people who have not filed.

References

BankruptcyAction.com. (2005, October 17). Bankruptcy Information. Retrieved November 16, 2011, from Bankruptcy Information: http://www.bankruptcyaction.com/questions.htm#GetCredit

Federal Judiciary. (n.d.). Federal Courts. Retrieved November 16, 2011, from Liquidation Under the Bankruptcy Code: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx