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What is Chapter 7 bankruptcy anyway?

When under the pressure of overwhelming amounts of debt, it can feel as if there is no way out. Bankruptcy can create a glimmer of hope and help relieve some or all of that debt. However, some confusion still exists about what exactly Chapter 7 bankruptcy is and how it works. For those unfamiliar with bankruptcy law, this is entirely understandable. Before making the decision to proceed with a bankruptcy filing, most people in Washington can benefit from a more in depth understanding of the process.

In perhaps the most basic terms, bankruptcy can be defined as a legal process for consumers to discharge their debts and, in some cases, repay certain creditors. This process is not immediate, and for Chapter 7 filings, they can last for anywhere from three to six months. During this period of time, debtors who have filed for bankruptcy in search of debt relief enjoy the protection of the court, and creditors may no longer make harassing phone calls, send letters or make contact with the debtor.

Chapter 7 in particular is a popular choice for the most burdened debtors. Barring a few exceptions -- specifically, taxes or court-ordered child support payments -- Chapter 7 allows debtors to discharge most if not all of their debt. This debt is often discharged through the liquidation of assets, the proceeds of which are then paid toward the debt. The fear of losing all of their possessions often prevents those who could benefit from the process from filing, but the vast majority of people are able to retain ownership of their vehicle, furniture and even their house.

Far from what some people tend to believe, filing Chapter 7 bankruptcy does not mean that a person will lose everything that he or she owns. In reality, it can provide Washington debtors with the necessary tools to create a more stable and financially successful future. This can be accomplished while still retaining ownership of some of the most important possessions in their lives.

Source: FindLaw, "Bankruptcy Definition: What Exactly Is It?", Accessed on Sept. 30, 2015

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