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What are some basic questions about Chapter 7 bankruptcy?

David Sexton

Tennessee residents know that Chapter 7 bankruptcy can be a useful tool to address burdensome debt obligations. However, they may not know some of the basics about the bankruptcy process and how exactly Chapter 7 bankruptcy works. So, what are some of the basic questions that our readers may have about Chapter 7 bankruptcy that need to be answered?

Well, for starters, while Chapter 7 bankruptcy - also known as "liquidation" bankruptcy - is intended to help a bankruptcy filer wipe out most debts, the process may not actually take care of all debt obligations. For example, many people in Tennessee and throughout the country have student loan debts. In the vast majority of cases, student loan debt will not be discharged in the Chapter 7 bankruptcy process. But, debt obligations like credit card debt and personal loans may be wiped out, albeit after some of the filer's assets are liquidated, with the proceeds applied to outstanding debt obligations.

Next, perhaps the most immediate benefit of filing for bankruptcy is an automatic stay. This is a legal mechanism by which debt collectors and creditors, upon being notified that a debtor has filed for bankruptcy, must cease all collection efforts. This can give a Tennessee resident some breathing room when it comes to finances.

Lastly, perhaps the most basic question to answer about Chapter 7 bankruptcy is who qualifies for this particular bankruptcy process. If a filer has an income that is too high to qualify for Chapter 7 bankruptcy, they may need to explore Chapter 13 bankruptcy instead.

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