Do creditors get paid when you file chapter 7 bankruptcy?

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Question:

Do creditors get paid when you file chapter 7 bankruptcy?

Answer:

Bankruptcy, according to the U.S. Federal Trade Commission (FTC) is often called the debt management of last resort. However, it doesn’t mean bankruptcy isn’t best for people who need help dealing with their debts. For individuals who are interested in filing personal bankruptcy, they have two options. The option they are eligible to file will have effects on their creditors. This means that the specific bankruptcy chapter they file may leave creditors without any money.

Chapter 7 legally allows creditors not to be paid. In other words, chapter 7 provides debtors the opportunity to eliminate their unsecured debts without paying creditors. Therefore, creditors such as credit card companies, department stores, individuals and physicians won’t be paid for the credit they extended to debtors or the services they provided.

Chapter 7 provides debtors with an automatic stay. The stay doesn’t allow creditors to sue or garnish wages will debtors are going through the bankruptcy process. Creditors can’t get paid after the bankruptcy is over because the debts are wiped out.

Creditors have limited options to obtain any money from debtors. However, they can seek legal assistance from a lawyer to find out if they have any options. Also, debtors deciding to file chapter 7 should talk to a bankruptcy lawyer to make sure they are eligible to file the bankruptcy chapter and understand the bankruptcy process. For instance, debtors and creditors must attend the meeting of the creditors where creditors can question debtors about how much income they have.

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