Email this page to a friendChapter 7 bankruptcy law
Chapter 7 of the federal bankruptcy code is designed to allow those who qualify to eliminate all or some of their unsecured debts. Chapter 7 bankruptcy is officially known as a “liquidation” bankruptcy. The theory is that non-exempt property is sold to pay creditors and the balance is wiped away or discharged. Not everyone qualifies for Chapter 7 Bankruptcy, but those that do qualify can reap the benefits of a financial fresh start.
Although the requirements of who can and cannot file a Chapter 7 Bankruptcy changed in October of 2005, most people who could file a Chapter 7 Bankruptcy before October of 2005 can still do so. Currently, if you have not filed for Chapter 7 Bankruptcy in the previous eight years or a Chapter 13 Bankruptcy in previous six years, if you spend more money each month than you make, if you earn less than the average household size in your state and you do not own any non-exempt assets you might qualify for a Chapter 7 Bankruptcy. Some of the eligibility requires for a Chapter 7 Bankruptcy may vary from state to state, and even county to county.
The process of filing a Chapter 7 Bankruptcy begins even before the preparation and filing of the bankruptcy petition. It is important to understand and get advice about your assets, debts, income, expenses, statement of financial affairs and statement of intent from competent legal counsel before filing. It would not be advisable to file a case without first getting good legal advice about the ramifications of filing.
The bankruptcy petition and schedules are documents that contain information about your debts, assets, income and your financial status for the previous few years. The bankruptcy petition is used to demonstrate that you qualify for Chapter 7 bankruptcy discharge, determine which of your debts will be eliminated, what property you will be allowed to keep and which debts you have chosen to keep. After the filing, debtors are required to attend a Meeting of the Creditors according to Section 341 of the bankruptcy code. There you will meet a Chapter 7 Trustee. He or she is an agent of the Executive Office of the United States Trustee and represents your creditors. The Chapter 7 Trustee reviews your case, makes recommendations to the United States Trustee regarding fraud or abuse issues, files reports to the court and administers any non-exempt assets for the benefit of creditors. If all goes well, in three to four months you will receive your discharge, and your case will closed. At the time of your discharge, your pre-filing unsecured dischargeable debt will be eliminated forever!
Upon the filing of a Chapter 7 bankruptcy all creditors, even those whose debts will not be discharged, most stop collection proceedings. The filing of a Chapter 7 bankruptcy has the power to stop all types of direct collection action by creditors including garnishments, seizure of assets, lawsuits and harassing phone calls. While the bankruptcy is pending, typically three to four months, your creditors cannot contact you directly or collect from you. If you successfully complete a Chapter 7 bankruptcy, the collection efforts of debt that was discharged are forever stopped! However, collection efforts on non-dischargeable debts can resume.
If you successfully complete a Chapter 7 Bankruptcy, most types of your unsecured debts can be eliminated, or discharged. An unsecured debt is a debt which is not attached to a piece of property. The most common types of unsecured debts are credit cards, medical bills, personal loans, utilities and payday loans. All of those types of debts can be eliminated in a Chapter 7 Bankruptcy. Even those debts that are subject to lawsuits and judgments can be discharged. Some debts in a Chapter 7 Bankruptcy will not be discharged. For instance, student loans, debts obtained by fraud, past due child support, court ordered restitution, and recent taxes will not be eliminated. Also, debts on large secured property, such as car loans and mortgages you wish to keep will not be discharged. However, if no you longer want to keep paying on a car loan or mortgage, and you are willing to surrender the property, a car loan or mortgage can be eliminated.
Most types of personal property and real-estate are protected from creditor seizure during, and after, the filing of a Chapter 7 Bankruptcy. If you are financing property, such as home or a car, and you can stay current on your monthly payments, and the property has no non-exempt equity, you can keep the property. Also, for paid in full items, the bankruptcy code recognizes laws called “exemptions” which protected equity in all of your property. Exemptions can very from state to state, and can be used to protect everything from the money in your bank account to your home to the shirt on your back!
So it is critical to contact a Legal Helpers attorney to see if you qualify for Chapter 7 Bankruptcy, and if a Chapter 7 Bankruptcy is the right choice to address your financial needs.
