Chapter 7 Bankruptcy
A Chapter 7 is the most popular type of bankruptcy. The filing of a Chapter 7 bankruptcy case results in an automatic stay that prevents all attempts to enforce a debt owed. The main goal of a Chapter 7 bankruptcy case (as well as other Chapters) is to obtain a “discharge,” which allows individuals and businesses to obtain a “fresh start” and eliminate some or all debts.
A Chapter 7 bankruptcy is a liquidation bankruptcy, which involves the liquidation of any assets owned by debtors to pay their creditors. Thereafter, most debts are wiped out in a legal proceeding conducted under the Federal U.S. Bankruptcy Court. Bankruptcy, in effect, discharges debts such as credit card bills, medical bills, personal loans, delinquent utility bills, old tax debt, judgements, and deficiencies on repossessed vehicles. In a Chapter 7 bankruptcy, you will never have to pay your creditors for these debts following your discharge. Your mortgage, however, may remain.
There are several types of debts that usually cannot be discharged by filing a Chapter 7. These debts include alimony and child support debts, recent tax debt, student loans, fines for criminal violations (such as injury caused to another while under the influence), debts incurred through fraud, and certain types of court-ordered damage awards. Student loan debts may only be discharged if there are hardships such as a disability.
When eligible, a Chapter 7 bankruptcy provides great advantages to debtors as it allows them to erase most debt they owe in 4 to 6 months.
If you are struggling with your finances and wanted to learn about your options, call us now for a free consultation!