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Chapter 7: a great weapon against medical, credit card debt

A Chapter 7 bankruptcy can help a financially distressed family in Riverside, California in a lot of ways. However, it is particularly effective when a person's debts consist primarily of medical bills, credit card debts and the like.

The reason is that these debts are usually what are called unsecured debts.

While that is actually a legal term of art, it basically means that the creditor has the right to sue the debtor if the debtor does not pay, but the creditor otherwise has no means of automatically taking the debtor's house, car or other property if the debtor falls behind.

This stands in contrast to a secured creditor, like in the case of a mortgage or a car loan. A secured creditor has been promised collateral, such as the debtor's house or car and, provided they have taken the right legal steps, the creditor can take the collateral if it starts to look like they won't be getting repaid.

In a Chapter 7 bankruptcy that goes normally, unsecured debts are effectively wiped out. The discharge prohibits the creditors from suing on the debt, and they have no other means of collecting. Of course, if the debtor did have property that was not exempt, that property does get sold and some of the proceeds divided to pay debts.

On the other hand, even if they no longer can sue the debtor, secured creditors get to keep their right to claim the collateral on their loans.

While this overview will hopefully give Riverside residents a basic overview of how Chapter 7 bankruptcy can help them resolve medical and credit card debt, they are encouraged to speak with an experienced attorney for additional details.

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