How Often Can You File For Chapter 7 Bankruptcy?

When someone files for Chapter 7 bankruptcy, the person or company that owes the money is usually the one who files for bankruptcy. This person, called the debtor, wants to get rid of their bills by selling nonexempt assets. At the same time, a bankruptcy judge watches over them.

Items that aren’t protected from bankruptcy are usually sold or liquidated by the bankruptcy attorney in Chapter 7 to pay off debtors. Assets that are exempt, which vary by state, can only be sold for a certain amount. The money from the sale of nonexempt assets is split among creditors in a way set by bankruptcy law.

How you handle a mortgage in Chapter 7 bankruptcy depends on whether it is secured or unsecured. If the mortgage is backed by assets, like a house or car, the debtor can repeat the debt and keep making payments to keep the property. If the mortgage debt is too much to handle, the person may give up the house and have the debt forgiven, which could cause the house to be foreclosed on or removed.

Chapter 7 bankruptcy can stay on a person’s credit report for up to 10 years. This can lower credit scores and make it harder to get loans. But it gives people a fresh start by getting rid of certain bills and stopping actions taken by creditors like garnishing wages. Over time, people can rebuild their credit by using good money habits, like paying their bills on time and being careful with new credit accounts.