How Chapter 7 Can Protect You From Your Creditors

Posted by Margaret Henehan on June 18, 2021 at 7:33 AM
Margaret Henehan
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A hand holding an iPhone with the screen displaying an incoming call from a CREDITOR, representing how chapter 7 can protect you from creditors in Minnesota.Chapter 7 bankruptcy, also commonly referred to as the “fresh start” bankruptcy, is one of the most commonly filed bankruptcies in Minnesota for several good reasons. Not only immediately after you file a Chapter 7 are you protected from any creditors, but creditors are not allowed to repossess or foreclose on any property while you are in a Chapter 7.

What Creditors Can and Can't Do During Your Bankruptcy

If creditors do try to repossess or foreclose on any property while you are in Chapter 7, they will need to get the bankruptcy court’s approval first. Creditors are also not allowed to take an unsecured debt and turn it into a secured debt. You also get the option to keep any property that secures a debt, like a car or a house, and continue paying on the debt. 

Surrendering Property to Creditors

You could also surrender property such as cars or houses in the bankruptcy too. This can be really helpful for people that can’t afford their secured debt, but don’t want to have their credit reports show a foreclosure or repossession. Once you file bankruptcy, these creditors can’t report the property surrendered in the bankruptcy to credit bureaus.

When you surrender property to your creditors they take the property back and liquidate in order to pay your balance due. However, even if they can’t make enough money to pay your balance in full the rest of the debt owed still gets wiped clean. Forever. Tax Free! Plus, filing bankruptcy protects you from getting sued by them for the remaining balance. This is quite contrary if you don’t file. You’ll be stuck with the debt and possibly penalized if applicable.


If you have a car or a house you can’t afford any longer, please reach out for a free bankruptcy consultation. We can do them by phone, virtually by zoom, or in person. Please reach out to us at or 800-551-3292.


Topics: Chapter 7 Bankruptcy

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