Chapter 7 Bankruptcy-A Quick Overview
There are six basic types of bankruptcy under the US Bankruptcy Code. Chapter 7 is a “liquidation” of nonexempt assets to pay debts. The court will an appoint the debtor a trustee. This trustee will liquidate the non-exempt assets and distribute the proceeds to the creditors. The Bankruptcy Code allows the debtor to keep certain exempt property. Anything that is not exempt will be part of the liquidation (this means the trustee will sell it).
In the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, if a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief. These limits do vary from state to state. Filing a petition under Chapter 7 automatically stays most collection actions against the debtor or the debtor’s property. Potential debtors should realize that the filing of a petition under chapter 7 might result in the loss of property. Chapter 7 is not right for everyone considering a bankruptcy. Knowing what can and cannot be included can help you decide if it is right for you.
What Can Be Included
- credit cards
- unsecured loans
- hospital bills
- other medical bills
- unpaid rent
- utility bills
What Cannot Be Included
- state and federal taxes (unless older than three years
- child support
- alimony
- government backed student loans
- debts due to fraud, fines, penalties and debts due to willful injury to another person or property
Debtors will receive a discharge letter a few moths after filing. Chapter 7 bankruptcy allows the debtor to have a fresh financial start. In order to file for Chapter 7 bankruptcy, you will need to employ the services of a lawyer. There are sites online that say you can do it yourself, this is not advisable. You do not want to take bankruptcy lightly. You can easily make your situation worse trying to do-it-yourself.
