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Chapter 7

Chapter 7 (Straight Bankruptcy)

The main function of a Chapter 7 is to discharge your debt in exchange for liquidating your nonexempt assets. That means that you will be given a new start, debt free; no more angry calls from creditors and no more unreasonable bills.

With this said, it is also important to know that a Chapter 7 bankruptcy is not a cure all. Although most types of debt may be eliminated by a Chapter 7, some types of debt (such as alimony and child support) are protected by law from discharge. In some cases a Chapter 7 may also result in loss of portions of your property. While this shouldn’t dissuade you from exploring Chapter 7 as an option, knowing how the system works will help you to make the best choice. The information bellow will help you to construct a mental overview of how bankruptcy works. However, you will probably find it the most helpful to speak with someone who negotiates bankruptcy cases professionally. This is where attorney George H. Weber comes in. He specializes in helping people get out of debt and will be able to guide you through the bankruptcy process. Once you have looked over the information bellow, consider signing up for a free consultation. In addition to regular business hours, evening and weekend appointments are available.

What is Chapter 7?

The end result of a Chapter 7 Bankruptcy is the discharge of debt. Basically, the court negotiates an agreement in which you give up a portion of your property (generally worth less than the value of your debt) and in exchange your debtors are forced to cancel your debt. All property that you own that is not considered “exempt” by the court will be sold and the proceeds will go to your debtors. However, in many cases a significant portion or even all of your property may be considered exempt, allowing you to suffer little to no loss.

What types of property are exempt from liquidation?

Confusingly, the types of property that are exempt vary from state to state, and in some case you will have the choice between one set of exemption laws given by the federal government and another given by the state government. An attorney will be able to explain to you in detail which of your property may be considered exempt. For this reason, it is best to consult an attorney before undergoing bankruptcy proceedings. This way you will have the best chance of maximizing the amount of property you will be allowed to keep.

Are there any types of debt than cannot be canceled through a Chapter 7?

Yes. Unfortunately, there are a few types of debt that you will still be required to pay even if you declare Chapter 7 bankruptcy. These include child support, alimony, court restitution orders, some types of taxes, student loans, and criminal fines.

How do the proceedings for a Chapter 7 case work?

Here is a step by step run through of what will take place in a Chapter 7 case:

The first step is for you to file a petition with the bankruptcy court that presides over the area where you live. With the petition you must include a few vital documents. These are:

• A list of all of the things you own as well as the debts that you owe.
• A budget including your income and all of the money that you spend each month.
• A formal statement summarizing your financial situation.
• A list of all contracts and leases that you are bound to.
• Your most recent tax return, and in some cases tax returns from prior years.
• A certificate of credit counseling.
• You attorney will be able to assist you in compiling this list in a form that is acceptable to the court and conducive to the success of your case.

Next you will be required to pay a set of fees to the court. Altogether, these amount to about $300. However, in some cases you will be able to petition the court to waive this fee, or get them to allow you to pay it in installments.

You will need to file a schedule of exempt property. This is a list of things you own that the court will not be allowed to take away. Your attorney will be able to help you to determine which of your possessions qualify for exempt status.

Once your petition has been successfully filed, this will immediately suspend collection efforts on the part of your creditors.

The next step will be what is called a “meeting of the creditors.” This will be a meeting between you, your creditors and a trustee assigned by the court. The purpose of this meeting is to ensure that your case is a legal application of Chapter 7. This will be decided by the trustee. In the case that the trustee decides that you are not eligible for Chapter 7, you will have the option to change your case into a Chapter 13.

Assuming that the trustee confirms your eligibility, the case will then be ready to proceed and in most cases the bankruptcy court will eliminate your debt.