Bankruptcy 101. Failure. Deadbeatism.
The ominously titled Chapter 7 gets its name from the 7th Sign of the Apocalypse, in which the deadbeat is basically hitting control-alt-delete in their life, financially speaking.
Specifically, this reboot has the deadbeat liquidating essentially all of her assets to pay off debts, before she is given a clean slate, so to speak, with the excess written off.
It’s like inviting an auctioneer to barge into your life, rummage through everything you have, and sell it for you.
Make a mental note: each state has different requirements for this process. Exemptions are things the person is allowed to keep; a home may be allowed as an exemption, but there will be a dollar amount cap on the home’s value. Cars might have this condition as well.
Cons: the bankruptcy can stay on credit reports for 10 years, and there will be no credit cards or car loans for the bankrupt person for a while. Only one Chapter 7 bankruptcy is allowed per 6 years, which could bite you if you’re not well-prepared during the first one. It also won’t dismiss student loans. If you’re not considered poor enough, the court might refuse your request to be bankrupt, and convert the Chapter 7 to a Chapter 13. That’s a big deal, because a 13 doesn’t auction off your stuff and get it over with in a few months (usually 6 months or less). Instead, it makes you pay off debts in 3-5 years.
The pros: Chapter 7 can be a quick process, and you can keep some of your belongings. And, since you’re out of bankruptcy quickly, you might qualify for credit sooner than with other bankruptcies.
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Finance: What is Bankruptcy?260 Views
Finance a la' Shmoop what is bankruptcy well in the old days
this was bankruptcy you'd go to prison if you couldn't pay your bills and [People in prison for bankruptcy]
unfortunately there weren't and still aren't a lot of legal high wage earning
opportunities in prison working your way out of debt on the chain gang wasn't [Prisoners working outside]
really a thing back then so instead the burden would be on your family to pay
back the loan you'd promised to pay back and didn't ugly situation it paved the [Officer knocking on a prisoners family member to pay their debts]
way for some well today bankruptcy has a range of flavors that it comes in but
basically it exists as a legal vehicle to avoid the aforementioned situation a [Bankruptcy van driving]
bankrupt person and/or corporation stands in front of a judge they turn
their pockets inside out with a sad face and the judge then decide who will be [Person opens their pockets inside out in front of a judge]
paid when and how much well how does she decide the order for who gets paid back
when? well, it usually prioritizes employees and vendors owed a paycheck
above banks who have made a loan and under that umbrella all different types
of loans have different priorities if the bankrupt individual owns a home it's [bankrupt individual in his home on the toilet reading a newspaper]
usually sold out from under him and anything left after paying off the
mortgage is used to pay others even if you do survive a bankruptcy your credit
is pretty much ruined who's going to want to loan you money once you've
proven that you're not good with being loaned money yeah if you've defaulted in [a really low credit score chart for a bankrupt individual]
the past on promises to pay people back why wouldn't you do the same thing again
well remember that twenty dollars you loaned your buddy Eric that he never [Person loaning 20 dollars to friend Eric
paid back well how eager are you going to be to hook him up with another twenty
especially since you'd only be feeding his betting on frog fighting habit yeah [Eric betting money on frog fighting]
not so much so long Eric you'll get the help you need!
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