Chapter 7 bankruptcy is one of simplest forms of bankruptcy, and it is also one of the most powerful. Chapter 7 can stop a judgment, but it has even broader powers. Chapter 7 can completely eliminate the judgment and other secured debts in only a few months. Other forms of bankruptcy, such as Chapter 13, aren't nearly as fast, with Chapter 13 requiring a payment plan over three to five years, according to legal website Nolo.com.
Automatic Stay Provision
Chapter 7 and other forms of bankruptcy are designed to give people relief and protection from creditors as they seek to reorganize their finances. Filing for Chapter 7 or another form of personal bankruptcy immediately results in a bankruptcy judge issuing a legal order called an "automatic stay." The stay stops the judgment and prevents debt collectors from collecting from you on the judgment and other delinquent debts.
Wage Garnishment
Chapter 7 bankruptcy and the automatic stay also immediately stop wage and bank garnishment. "The New York Times" reported in 2010 that wage garnishments were on the rise around the country as credit card companies increasingly turned to lawsuits to collect delinquent debts. After winning judgments many creditors ask the court for permission to garnish your wages and bank accounts. Many people file for Chapter 7 bankruptcy for the sole reason of ending the pay garnishments.
Bankruptcy Attorneys
You can file for Chapter 7 bankruptcy protection on your own, but the paperwork and the process is extensive. Bankruptcy attorneys will represent you for a fee, and you may be eligible for free representation through your local chapter of Legal Aid. Most bankruptcy attorneys offer initial consultations for free, offering an opportunity for you to learn about the process. You can learn even more by scheduling free consultations with two or three bankruptcy attorneys and asking different questions each time. That will help you decide if bankruptcy is for you.
Pre-Bankruptcy Counseling
Formal pre-bankruptcy counseling can also help you decide. Nolo.com reports that before filing for Chapter 7 you must present a certificate showing you have completed a counseling session with a trained credit counselor. The counselors are available in cities across the country and are certified by the U.S. Trustee program of the U.S. Department of Justice. The counselors will discuss the advantages and disadvantages of Chapter 7 bankruptcy, including its crushing effect on your credit. Alternatives to bankruptcy and other options for resolving your judgment will also be discussed.
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