When you feel like you are in over your head and constantly struggling with your finances, realize that you have options. It’s important to consult with an experienced bankruptcy attorney to discuss your options.
So How Does A Chapter 7 Bankruptcy Work?
In a Chapter 7 bankruptcy, a popular type of filing, the bankruptcy trustee cancels the majority of your debts. At this same time, the trustee could liquidate some of your property to repay your creditors. This is referred to as liquidation or straight bankruptcy. It’s primarily named that because it allows you to wipe out the vast majority of your debts. It is outlined in Chapter 7 of the federal bankruptcy code. The Chapter 7 bankruptcy process typically takes several months as well as filing and administrative fees.
In certain situations, you might need to complete credit counseling with an organization approved by the United States Trustee. Individuals eligible to file for Chapter 7 bankruptcy will fill out a petition and several other forms with a local bankruptcy court. The information asked about on these forms includes:
Or, a property that the law should allow you to keep during the Chapter 7 bankruptcy process.
You are unable to file for Chapter 7 bankruptcy if you received a bankruptcy discharge in the last 6-8 years. Another way to disqualify is if your expenses, income and debt burden allow you to complete a Chapter 13 repayment plan.
The automatic stay offered by Chapter 7 is one reason for it to be chosen. If you receive threatening or harassing phone calls or letters from creditors, an automatic stay initiates when you file for bankruptcy. It prevents these individuals from continuing with their behavior. Temporarily, creditors are unable to draw from your bank account, garnish your wages, go after your other property or disconnect your utilities.
When you file for Chapter 7 bankruptcy, you put the property you own and the debts you owe in the hands of the bankruptcy court. This means you can’t give away or sell any of the property you own without the court’s consent.
The court exercises its control in your case through a bankruptcy trustee. The trustee is responsible for examining your documents to ensure they are complete. They also identify any non-exempt property that to be sold to benefit the creditors. The trustee also analyzes your financial transactions over the previous years to determine whether any of these could be undone to lead to more money given to your creditors.
Shortly after you file for Chapter 7 bankruptcy, the creditors listed in your bankruptcy filing will receive notice of a creditors’ meeting. After swearing in, these individuals are eligible to ask you questions regarding your bankruptcy and the materials filed. This may be your only visit to the courthouse during a typical Chapter 7 bankruptcy.
If the trustee determines that you have non-exempt property, you may be responsible for surrendering it or providing the trustee with its equivalent cash value. The majority of property owned by Chapter 7 debtors is worthless for the purposes of generating funds for creditors or exempted. This means that very few debtors may ultimately surrender the majority of their property.
In the event that you pledge some property as loan collateral, you will have a secured debt. The most popular examples of this include automobiles and houses. In the event that you have missed payments for either of these, a creditor can request that your automatic stay is listed in order to foreclose or repossess this property. If a creditor has entered in a lien against your property as a result of your debt that you haven’t paid, that debt may also be secured by you may be able to wipe out the lien in a Chapter 7 bankruptcy.
At the conclusion of your Chapter 7 bankruptcy process, all of the debts will be discharged by the court except for those that are classified as non-dis-chargeable and those that automatically survive bankruptcy like tax debts, child support, and student loans.