These tough economic times have been difficult for many people, including a number of residents of California. This has led many families to turn to Chapter 7 bankruptcy for relief. Bankruptcy may be the only way for some individuals to work their way out of debt.

The current times have hit many individuals including elected officials. For example, one selectman recently filed for Chapter 7 bankruptcy protection citing debt of over $800,000 owed to over 20 creditors. His creditors range from family members to the Internal Revenue Service.

His debts include debts from mortgages, credit cards and debt to advertisers and investigators. His tangible assets include his vehicle, household goods and furnishings and clothing. Like many people seeking debt relief, his monthly income of just over $2,000 a month is not enough to cover his roughly $4,000 of monthly expenses.

For those in situations like this public servant in Massachusetts recently elected to his fourth consecutive term, Chapter 7 bankruptcy allows individuals or families to eliminate some or even all of their debt. If Chapter 7 bankruptcy relief is granted, debt can be discharged. To obtain Chapter 7 protection, the individual or family must pass a qualifying test. If the individual does not qualify for Chapter 7, he or she may then turn to Chapter 13. Chapter 13 allows the individual to restructure debt. Under Chapter 13, the individual must generally repay debt within three to five years.

The debt that may be discharged under Chapter 7 includes credit card debt, medical bills and mortgages. Debt that cannot be discharged under Chapter 7 includes student loans and child support payments.

Bankruptcy also places an automatic stay on any creditors actions against the individual filing for bankruptcy. The stay prevents foreclosure, avoids wage garnishment and stops repossession.

Source: MetroWest Daily News, "Northborough selectman chief files for bankruptcy," Brad Petrishen, Nov. 28, 2012