What is Chapter 7 Bankruptcy?
Chapter 7 allows individuals to completely eliminate debts to give an honest individual debtor a “fresh start.” Through Chapter 7 bankruptcy, the debtor’s assets are sold and distributed to creditors. Certain property is exempt from this process, allowing the debtor to retain such property. Available exemptions vary depending on the state of filing.
Unsecured creditors file a claim for distribution of the debtor’s estate.
Before filing bankruptcy, consider all available options.
The debtor usually receives a discharge, within 4 months, releasing him from personal liability for dischargeable debts.
After bankruptcy, an identifying statement sometimes remains on the debtor’s credit report for 10 years.
Keep Property without Paying Debts Under Chapter 7
Generally, all of your property will be exempt, allowing you to keep your assets without paying debts. Which property qualifies as exempt depends on the federal and state laws applicable to your state. In a Chapter 7 bankruptcy the trustee sells nonexempt property to satisfied debts in accordance with the provisions of the Bankruptcy Code.
Typical exemptions include $75,000 of equity in your residence, $21,800 of equity in personal property, plus the standard exemptions for your car, jewelry, household goods, tools of the trade, and many other exemptions.
Chapter 7 Does Not Extinguish Liens on Property but the Underlying Debt is Discharged
Many assets are subject to liens and mortgages (i.e. home loans, car loans, etc) which enable the lender to foreclose or repossess the property to satisfy the loan.
Secured creditors are often willing to renegotiate with bankrupt debtors on existing loans. The decision of when to file is important in maximizing all financial remedies. Thus, it is important to consult an attorney before filing for bankruptcy to assist in negotiating with creditors.
What Can I Discharge in Chapter 7 Bankruptcy?
In most cases, almost all debts are dischargeable, including but are not limited to:
(1) credit cards,
(2) medical bills,
(4) collection accounts,
(6) car loans,
However some debts are non discharge-able as an operation of law, these include but are not limited to:
(1) Student Loans
(3) Child Support
(4) Judgments for Fraud
(5) Judgment for Personal Injury where the Debtor was under the influence of alcohol or drugs
(6) Debts assumed pursuant to a Marriage Settlement Agreement or Family Court Order 11 U.S.C. § 523(a).