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Chapter 7 bankruptcy basics

The term consumer bankruptcy can be confusing for many Kentucky residents. Many individuals do not understand exactly what bankruptcy entails and its purpose. Basically, it is a federal court proceeding that aids in getting the filer out from under the burden of debt. If eligible, it is possible for an individual to have his or her debts discharged under a Chapter 7 bankruptcy.

With a Chapter 7 bankruptcy, unsecured debts are typically discharged. This includes credit card debts and others that are not secured by specific collateral. It is possible that certain assets may have to be turned over to the bankruptcy trustee for liquidation, though there are a number of state exemptions that may come into play. The assets are then sold and the proceeds used to reduce the filer's debt.

The filer may have secured debts as well. These obligations often include mortgages and car loans. In this case, it may be possible to retain this property by continuing to make the required payments. Otherwise, the property may be repossessed by the secured lien holder.

Filing for Chapter 7 bankruptcy may not remove all of a Kentucky resident's financial obligations. If the filer owes back taxes, child support or alimony payments, those debts will likely remain. Additionally, in order to file for Chapter 7, the individual needs to be able to prove that he or she does not have enough disposable income to qualify for a Chapter 13 bankruptcy repayment plan. An experienced bankruptcy attorney can assist in deciding which form of bankruptcy is the appropriate choice.

Source: bankruptcy.findlaw.com, "Bankruptcy Definition: What Exactly Is It?", Accessed on March 4, 2017

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