Bankruptcy is one of a debtor’s most powerful tools to avoid paying off debt owed to a creditor. If granted bankruptcy, debtors may be able to absolve themselves from responsibility for some of their debts. When a debtor files for bankruptcy, the court can place an automatic stay on the creditor’s debt collection efforts until it decides on the bankruptcy case. Creditors can object to the automatic stay or the bankruptcy claim. Creditors have two types of bankruptcy they most often deal with, each having a different effect on their ability to collect debts.
Chapter 7
Chapter 7 bankruptcy is considered favorable for debtors who do not own many high-value assets. In order to qualify for this form of bankruptcy, the debtor:
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