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CHAPTER 7
What is Chapter 7?

The most common form of Bankruptcy is a Chapter 7 or straight liquidation Bankruptcy. You get rid of all your debts that are “dischargeable,” like credit cards, medical bills, personal loans, paydays, deficiencies following a repossession or foreclosure and other unsecured debts. You get to keep whatever property is “exempt” according to State and Federal Law.

CAUSES OF FILING BANKRUPTCY:

The chief reasons people seek bankruptcy protection is to stop foreclosures, repossessions, wage garnishments, lawsuits and the never-ending harassment of abusive debt collectors. Although most people would willingly pay their debts if they could circumstances like divorce, uninsured medical expenses, catastrophic illness or accident, downsizing, outsourcing, job loss, and just life all contribute to the filing of a bankruptcy.  Like any experience, the trick is to learn the lessons from life and not make the same mistakes that led you to where you are.

DISCHARGING DEBTS

The reason why most people file Chapter 7 is to take advantage of the Chapter 7 Discharge. Most unsecured debts are dischargeable, such as credit cards, medical bills, payday loans, personal loans, and other debts such as a deficiency following a foreclosure or repossessed vehicle. Some things, however, are “excepted” from or not subject to discharge, such as taxes that are fresher than 3 years old, spousal support and child support or domestic support obligations, students loans, intentional torts, and money or property obtained by fraud, i.e., knowing you can’t pay it back.

The way as Bankruptcy case works is like this:  You have to file paperwork with the court called “the Petition”.  Your petition is basically a description of your assets and debts, and a description of your financial transactions in the past few years.  Its not designed to question why you got there, it’s only trying to see where circumstances find you.

The discharge can be entered 60 days after first meeting of creditors. 99% of Chapter 7 filings are uncontested, and a creditor has to have specific reasons for objecting to your discharge which usually involves fraud. In order to dispute your bankruptcy, a creditor has to file a complaint objecting to the Discharge, an Adversary proceeding in the Bankruptcy Court. Once the discharge is entered, your creditors are permanently barred from making any further attempts to collect on their debts and are prohibited from contacting you again! That’s the whole point of a Chapter 7 Bankruptcy.

Secured debts, such as car loans, mortgage loans, and some types of loans involving personal property, survive a bankruptcy filing. That means that you have to keep paying those debts even after you file, by entering into a “Reaffirmation Agreement”19 and agreeing to remain personally liable ono the debt.

THE CHAPTER 7 DISCHARGE:

The goal of a Chapter 7 is to receive a Discharge and get rid of all your debts, credit cards, medical bills, payday loans, personal loans, judgments, deficiencies following a repossession or foreclosure and any other unsecured debt. When the discharge is entered, your creditors are forever barred from contacting you or taking any further action to collect on any debt. They can’t come back years later to see if you are then able to pay them. The credit reporting agencies are required to report your debts as discharged. There can be sanctions imposed against anyone who violates a discharge order, so you can finally live in piece after the Discharge is entered on the court’s files.