What is Chapter 7 Bankruptcy?

2007-04-17 10:41:55

( Legal )



Many people have heard it, but exactly what is chapter 7 bankruptcy? Chapter 7 bankruptcy, also known as straight bankruptcy, is the most common kind of bankruptcy filed. It refers to liquidation of your non-exempt assets. Your assets are sold, and the cash is distributed to your creditors as repayment. All of our dischargeable debts are then dismissed.

There are certain assets you can keep in a chapter 7 bankruptcy, depending on what state you live in and what your income is. You are typically allowed a limited amount in equity.

Generally, most of your debts are discharged in a chapter 7 bankruptcy. However, some debts, such as taxes, child support, criminal fines and most student loans are not discharged.

You may opt to hire a lawyer to help you in filing for your chapter 7 bankruptcy. If you decide to file it yourself, you have to fill out several forms, which are available online. Filing a bankruptcy costs a few hundred dollars. Once you have filed your bankruptcy, the automatic stay rule takes effect, wherein no creditors can contact you to collect your debt.

You will also have to attend a meeting of creditors, where you will be questioned regarding your assets and debts. Typically, the federal court will issue your discharge a couple of months after that meeting, which means that you are no longer obligated to pay the debts that have been discharged.

If your bankruptcy is dismissed, you can file again after half a year. Once your bankruptcy is approved, it will remain on your credit report for 10 years. You can only file a bankruptcy again after 6 years.

Knowing what is chapter 7 bankruptcy is essential for any individual. This can especially come in handy in cases of unemployment, accidents or unavoidably large expenses. Different states have different bankruptcy laws; take the time to know what is chapter 7 bankruptcy and how to file it in your state. It may just help you get a fresh start.


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