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Filing chapter 7 is also called “liquidation”. It is the most common bankruptcy
filing in America. 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. A 7 may stay on your credit longer than a chapter
13. You will repay nothing 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 chapter 7.
Typically it will cost $200. There is some basic information you should know.
Unsecured debt can be
discharged. Secured debt cannot be, but can be exempted and retained if
timely payments are made. This varies from state to state. 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 bankruptcy attorney.
Filing requires the completion of a chapter 7 bankruptcy form. Under chapter
7 bankruptcy law, it also may be initiated by creditors filing a petition
against the debtor. Chapter 7 bankruptcy law then initiates an "automatic stay”
that prevents your creditors from collecting from you. Many file to temporarily
protect their bank accounts or wages from garnishment. Until your bankruptcy
ends, your financial problems are in the hands of the court. Upon filing, the
court assumes legal control of your property (except your exempt property).
Nothing can be sold or paid without the court's consent.
If you own a business, Chapter 7 bankruptcy law
authorizes the trustee to operate your business for a limited time if it will
benefit the creditors and enhance the estate’s liquidation. The distribution of
the estate’s property is governed by section 726 of the bankruptcy law that
sets forth the order of payment of all claims. If you have property and want to
keep possession, you need to “reaffirm” the debt. Law defines this as an
agreement between you and your creditor whereby you will pay all or a portion
of the debt, even though you have already filed. You should consult a
bankruptcy attorney to protect your rights.
Rule 4004(c) states: 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 case (or 60 to 90 days after the date first set for the
meeting of creditors). When filing, a discharge is rarely denied. A discharge
can be denied if the debtor: fails to maintain adequate financial records;
fails to obey the court; does not properly explain any loss of assets; commits
a bankruptcy crime; or fraudulently conceals property that would have become
property of the estate.
A chapter 7 filing stays on your
credit for ten years from the date the chapter 7 bankruptcy is
discharged. However, it stays on your court records for 20 years as public
record. Issuers of credit consider it when deciding whether to extend credit.
Some credit issuers may extend credit only after a number of years have passed
or when it no longer appears on the credit report.
Filing chapter 7 bankruptcy is really the last
resort for anyone in a difficult financial situation. There are other options
available that you should explore first. Of course, in some cases it may be
necessary. However, as you can see from the chapter 7 bankruptcy information
presented above, it should be avoided, if possible. We can help reduce your
debts to a manageable level so you don’t have to proceed with it.
Click here for a free consultation from Knockout Debt.
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