Filing for Chapter 7 is the most accessible way of declaring bankruptcy. When most people think of declaring bankruptcy, the conception they have is that of Chapter 7. In actuality, this bankruptcy filing is known as liquidation. It is the simplest, and quickest, bankruptcy option. One of the primary purposes of bankruptcy is to discharge certain debts. By discharging debts, the debtor will not owe anything anymore. This serves to give a fresh start to individuals who need it. The right to a discharge is not absolute in Chapter 7, and some types of debts are not discharged. Generally, this filing can quickly free you from unsecured debt, which includes: credit cards, department store cards, medical bills, payday loans, some personal loans, utility bills, and more.
A Chapter 7 Bankruptcy is a liquidation of a debtor’s non-exempt assets. When you file for bankruptcy, a trustee is assigned by the court to your case. In Chapter 7, the trustee sells off as many of the debtor’s assets as allowed so that the debts can be repaid where possible. If more debt is owed than the value of the assets, the remaining debt is discharged. If managed properly, after a Chapter 7 filing is completed, debtors will have most of their debts erased or discharged. Although, there are some debts that are non-dischargeable, such as child support, alimony, student loans, judgments resulting from car accidents, deficiencies on repossessed vehicles, and some tax debts. Also, importantly, a bankruptcy discharge does not extinguish a lien on property. If the bank has placed a lien on your house for failure to make mortgage payments, Chapter 7 may not be the best option for you.
To utilize Chapter 7, the debtor may be an individual, a partnership, or a corporation or other business entity. But, businesses rarely use Chapter 7, as they cannot operate during the bankruptcy. A discharge is only available to individual debtors, not to partnerships or corporations. A business which opts for Chapter 7, is in all practicality, shuttering its doors.
For an individual debtor, however, there are quite a few benefits in declaring Chapter 7. Aside from discharging debts, it is possible to retain some property. If car and mortgage payments are current, and if there is no significant equity in the property, it is possible to make arrangements to reaffirm those debts. This can be quite reassuring for people who may lose their home to foreclosure and their car to repossession. Also, as soon as a debtor files for Chapter 7 bankruptcy, creditors are forbidden to call and pester. Being free from anymore more harassment and the stress that goes along with it, can be extraordinarily positive.
There are many filings associated with even the most basic Chapter 7 case. An experienced lawyer is strongly recommended as these can be complex. First, you must file a petition with the bankruptcy court in your area. In addition to the petition, you must file: a schedules of assets and liabilities; a schedule of current income and expenditures; a statement of financial affairs; and a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007(b). You must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year. 11 U.S.C. § 521. If you have primarily consumer debts, then you must file: a certificate of credit counseling; a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers; a statement of monthly net income; any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521.
With all of these filings and fees associated with just the initial steps of a Chapter 7 bankruptcy filing, the need for qualified help is paramount. You should not call just any lawyer, but rather an experienced bankruptcy attorney to help walk you through each and every step.