What Is A Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most common type of bankruptcy and is often referred to as a “liquidation bankruptcy.” Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills. Chapter 7 does not eliminate secured debts, such as vehicles (unless the secured item is surrendered) nor will it prevent you from losing your home to foreclosure. If you are in foreclosure, the filing of a suggestion of bankruptcy in the state court action will abate the action but will not dismiss the action.
Chapter 7 bankruptcy can discharge (get rid of) most unsecured debts, for example, credit cards, repossession debt, eviction or broken lease debt, some taxes, past due utilities, and medical bills. Chapter 7 stops garnishments, liens, levies, and lawsuits. Most individuals experiencing financial difficulty will qualify. You will be required to continue making payments on your secured debt (house and car payments, for example).
Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien. If you still have questions you can schedule a free consultation with a bankruptcy attorney.
Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick “fresh start”. • How difficult will it be to file Chapter 7 under the new bankruptcy laws? There has been much doom and gloom written about the bankruptcy means test under the new laws and how much more difficult it’s going to be to file Chapter 7. It’s true that there are more hoops to jump through under the new laws and it’s true that the bankruptcy means test will result in some people having to file chapter 13 instead of Chapter 7. However, for the vast majority of filers Chapter 7 is still available with very little extra effort! • What are the most
