Function

• Chapter 7 bankruptcy will assist debtors in being relived of overwhelming debt. The debtors are allowed this protection under the guidelines of the law and the creditors are also paid from the sell of any assets that the debtor may have. Chapter 7 is intended for those who little or no assets or income. Those who file chapter 7 can discharge all of their debt usually within four months. The Fair Credit reporting Act allows credit reporting agencies to list bankruptcy information on an individual's credit report for seven to 10 years.
  
  

Significance

• Anyone who files chapter 7 bankruptcy is required to take a credit counseling class at least 180 days before their actual bankruptcy is filed with the bankruptcy court. Individuals are also required to take a budget class that helps those who file bankruptcy to get their finances re-organized in order to create better spending habits. The fees for these classes are charged according to the state that the individual lives in but can cost up to $200. There is also a class that the individual must attend after filing the actual bankruptcy. There is a fee for this class but in some cases the bankruptcy attorney will include the cost of the classes in their bankruptcy fees.
  
  

Features

• Bankruptcy attorney fees vary. Most attorneys charge from $1,000 to $1,500 in fees for individuals who have no past due child support or alimony or contested matters. The individual must also not be delinquent on any federal taxes. The court fee involved in filing a chapter 7 bankruptcy can range from $275 to $300, depending on the individual's state. Many bankruptcy lawyers will allow individuals to pay the attorney fees on a payment plan.
  
  

Considerations

• Many are concerned if they can keep their property such as a car or house if they file chapter 7 bankruptcy. If the equity in the house is considered exempt and the payments can be continued, the house can be kept. The bankruptcy lawyer will advise the individual filing bankruptcy whether or not it is feasible to keep the house. For example, if the debtor has refinanced the mortgage, taken several home equity loans on the home or the cost of paying the mortgage is more than renting, the lawyer may advise the debtor to walk away from the home and start fresh. The debtor can also choose to keep a vehicle. Any other assets that the debtor may have may be sold to pay the creditor the debt that is owed.
  
  

Misconceptions

• Many people believe that if a person files for bankruptcy he is totally broke. This is not necessarily a true statement. Sometimes unforeseen circumstances, such as, medical emergencies or a death in the family can cause a person to fall behind in their financial obligations. Filing chapter 7 bankruptcy allows the person to get back on his feet again.