Filing chapter 7 is called liquidation. It is the most common bankruptcy filed in U.S. bankruptcy court. In chapter 7, a trustee collects the non-exempt property of the debtor, sells it, and distributes the proceeds to the creditors. It is cheap and quick, typically taking 120 days.
Filing chapter 7 bankruptcy costs $200. However, there is some basic chapter 7 bankruptcy information you should know. Unsecured debt can be discharged. Secured debt cannot be discharged, but can be exempted and retained if timely payments are made during the chapter 7 filing. The amount varies from state to state. In a 7, debts that cannot be discharged include: alimony and child maintenance, certain taxes, government backed educational loans, debts resulting from injury or death by the debtor to another entity, and debts for criminal restitution orders. For more information on other non-dischargeable debts, research chapter 7 bankruptcy law or contact your local attorney.
A chapter 7 filing may stay on your credit longer than a chapter 13 filing. In a chapter 7 you pay nothing back to your creditors. If you own a home with significant equity, have assets to protect, or have co-signers to a loan, you probably should not be filing a 7.
You will be required to complete a chapter 7 bankruptcy form. Under the law, it may also be initiated by creditors filing a petition against the debtor. The law initiates an "automatic stay." This stops your creditors from collecting what you owe. Many file to temporarily protect their wages or bank accounts. Until the chapter 7 ends, your financial problems are in the hands of the court. The court assumes legal control of your non-exempt property and debts upon your filing. Nothing can be sold or paid without the court's consent.
If the debtor owns a business, Chapter 7 bankruptcy law 11 U.S.C. § 721 authorizes the trustee to operate the debtor’s business for a limited period of time, if this will benefit the creditors and enhance the liquidation of the estate. The distribution of the estate’s property is governed by section 726 and sets forth the claims’ order of payment. If you have property like an automobile, and want to maintain possession, you may need to “reaffirm” the debt. The law defines this as an agreement between the debtor and the creditor where the debtor will pay all or a portion of the money owed, even though the debtor has filed chapter 7. You should consult an attorney to ensure your rights are protected.
Rule 4004(c) states that unless a complaint is filed objecting to the discharge of the debts or the debtor files a written waiver, the discharge will be granted relatively early in the process (or 60 to 90 days after the date first set for the meeting of creditors). When filing, a discharge is rarely denied. Under the law, a discharge may be denied if the debtor: fails to obey the court; fails to maintain or produce adequate financial records; does not properly explain any loss of assets; commits a crime; or fraudulently conceals property that would have become the estate’s property.
A chapter 7 filing may remain on your credit longer than a chapter 13 and there are some debts that cannot be discharged in a chapter 7 that can be discharged in a Chapter 13. Chapter 7 can stay in your credit file for up to ten years from the day of your filing, although rarely is it reported for more than seven years. Issuers of credit consider your this in deciding whether to extend credit. Some issuers of credit may extend credit only after a number of years have passed, or when it is no longer on your credit report.
Filing chapter 7 bankruptcy should be the last resort for anyone in a difficult financial situation. There are other options available that should be explored first. Of course, in some cases filing may be necessary. However, as you can see from the information presented, filing should be avoided if possible. A competent debt reduction company will reduce your debts to a manageable level so you don’t have to proceed with filing. Click here for a free consultation from Knockout Debt.
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