Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy or a liquidation bankruptcy cancels your debts. Chapter 7 refers to the chapter of the Federal Bankruptcy Code, which contains the bankruptcy law. This is an order for relief, or an automatic stay. Additionally, this immediately stops most creditors from trying to collect the debt owed. It also offers the following advantages for your financial relief:
 
  • Harassing Bill Collectors
  • Credit Card Bills
  • Foreclosure
  • Wage Garnish
 
  • Repossessions
  • Medical Bills
  • IRS Tax Problems
  • Lawsuits
 
  • Can Lower Car Payments
  • Judgments
  • Liens & Levies
 
 

It Can Protect:

 
  • Your Home
  • Your Wages
 
  • Your Car
  • Your Business or Property
 

The End of the Process

At the end of the bankruptcy process, all of your debts are wiped out (discharged) by the court with the exception of the following:

  • Debts that survive bankruptcy such as child support, most tax debts, and student loans (unless the court rules otherwise)
  • Debts that the court has declared non-dischargeable because the creditor objected (debts incurred by your fraud or malicious acts)
 
 
 

About Chapter 7 Bankruptcy

This is by far the most common type of bankruptcy. Also sometimes called straight bankruptcy, or simple bankruptcy. This will solve most of the problems people have with debt. The purpose is to give debtors a FRESH START free from debt.

The Chapter 7 is open to all individuals, businesses, or corporate entities. However, an individual must qualify to file a Chapter 7 case. Qualification is based upon income and expenses. This is usually not a problem for most people looking to solve their debt problems.

A book of papers is filed with the court. This is called a Petition. It contains a lot of financial information about the filer. It is basically a financial statement. You list everything you own and everybody to whom you owe money. In addition you must supply information about your income and expenses.

Immediately upon filing the Petition, an Automatic Stay goes into effect. It is a court order that prevents the filers' creditors from proceeding with attempting to collect on any debt owed by the filer. This Automatic Stay will halt garnishments of wages, repossessions, foreclosures, lawsuits, bank account seizures, the recording of liens. It will stop creditors from contacting the filer in any way except through their attorney.

4-6 weeks after filing there is one hearing that the filer must attend called a 341(a) Meeting of Creditors. There is a person at the hearing called a Trustee. The Trustee's job is to look for assets that can be sold to pay your creditors.

However, when a person files Chapter 7 the filer can claim exemptions, and the exempted property cannot be taken by the trustee. The exemptions are usually broad enough so that all of the filers property is protected from the Trustee. As a result, the filer can get rid of all their debt through a discharge, and still keep all of their property.

Approximately 3 months after the attendance at the Meeting of Creditors, the filer will receive a discharge. This discharge is a court order that prevents creditors from ever again trying to collect on the debt the filer owed. With a few exceptions, almost all debts are dischargeable in Chapter 7. It will relieve the filer from credit card debt, medical bills, personal loans, and almost any other type of unsecured debt.
 
Schedule an appointment at our law firm in Long Beach, California, to learn more about Chapter 7 bankruptcies.