When weighing your options when you are looking at a home foreclosure, you have a few choices.
Filing for Chapter 7 is one of them.
Chapter 7 bankruptcy, unlike Chapter 13 bankruptcy, is a situation where you opt to liquidate your assets, and the proceeds are used to pay off your creditors.
The homeowner is eligible for Chapter 7 whether they are employed or not.
Chapter 7 bankruptcy is not a repayment situation. In this case the bankruptcy trustee will sell the homeowner’s assets (the nonexempt assets that the trustee is allowed to take) and use the proceeds to pay the homeowner’s debts, in accordance with the prevailing bankruptcy laws. The homeowner will be allowed to keep what is considered exempt property (the property or items you are allowed to keep). There are state property exemptions and federal property exemptions. In some states you are allowed to choose between the two – state or federal exemptions, whichever is more advantageous for you in your situation (giving you the best options on what you would like to keep).
Filing for Chapter 7 bankruptcy will put the automatic stay (or stop) on your debt liabilities, meaning that the creditors cannot pursue any claims against the homeowner when there is a stay in effect. Creditors then cannot garnish wages, they are not even allowed to contact you by phone.
The goal of filing Chapter 7 is to obtain discharge releases from personal liability for most debts and to prevent the creditors from taking any further collection actions against the homeowner.
Generally, individual homeowners/debtors will be granted the discharge in approximately 99% of the Chapter 7 cases.
Is Chapter 7 the way to go for the people facing a home foreclosure? If you are looking for a complete fresh start, it is a viable option.
For others in home foreclosure not looking for that type of fresh start, Chapter 7 is definitely not the way to go, since there are other avenues the homeowner can take that allow you to keep your current assets.