Chapter 7 Bankruptcy

Chapter 7 Bankruptcy Overview

Chapter 7 Bankruptcy is governed by Chapter 7 of the Bankruptcy Code. Chapter 7 Bankruptcy is also known as a liquidation bankruptcy because debtors must liquidate non-exempt assets. This means the non-exempt assets are sold by the Chapter 7 Trustee for the benefit of creditors.

Fortunately, most consumer debtors’ assets are fully exempt under state or federal law and no assets are sold. When there are no assets to sell, the chapter 7 case is usually short and lasts approximately 3 months.
 
Clients might consider a Chapter 7 Bankruptcy if he or she has mainly unsecured debts, is current on the secured debts he or she wants to keep, has not filed another chapter 7 in the last 8 years and meets the income requirements. A business that plans to close might consider filing Chapter 7 Bankruptcy to liquidate assets. Often, the business will attempt to reorganize, but will later convert to a chapter 7 if the reorganization is unsuccessful. After filing a Chapter 7, Debtors will attend a meeting of creditors with their attorney. This meeting will occur 30 to 45 days after filing your Chapter 7 Petition. Although the meeting with the Chapter 7 Trustee is called a “Meeting of Creditors,” creditors are unlikely to attend. However, even though creditors may not attend the Meeting of Creditors, creditors may still participate in Chapter 7 proceedings. For instance, creditors and other parties have 60 days following the conclusion of the meeting to object to a debtor’s discharge. Your creditors may also wish to reaffirm secured property you wish to retain and make payments on or assume or reject contracts. If no objection is made to the discharge of your case and you have followed the bankruptcy rules, the Court can enter an order of discharge. A Discharge is the goal of a Chapter 7 Bankruptcy. Once you receive your Chapter 7 Discharge, you will have a Court Order discharging your dischargeable debts such as credit cards, medical bills and payday loans. You will continue to pay for your secured debts that you intend to retain, such as your home and your vehicles. You will also continue to make payments on your long-term debts like your student loans and child support. Creditors holding your dischargeable debts will be barred from contacting you or making any effort to collect your debts due to the Discharge Order. 
 
For more information about Chapter 7 Bankruptcy, be sure to see our Chapter 7 eBook.

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