What is Chapter 7 Bankruptcy ?

Chapter 7 bankruptcy, the inability to pay debts as they come due, and the discharge of debt for individuals. Chapter 7 bankruptcy in particular liquidates and divvies up the assets of the person who can’t pay their bills. Those assets are then redistributed amongst the creditors in as fair a manner as possible. Corporations and partnerships may liquidate their assets in bankruptcy, but they may not discharge their debts.


How Do I File For Chapter 7?

Chapter 7 is voluntary and filed by the debtor. A fee of around $200 is required at the time of filing and may be paid in installments. Married couples may petition together. These are the forms necessary to fill out and file:

• The petition
• Statement of financial affairs
• Schedule of assets and liabilities
• Schedule of current income and current expenditures (consumer debtors)

Immediately upon filing, an order of relief automatically results.


Can I Be Forced Into Chapter 7?

It is possible for Chapter 7 bankruptcy proceedings to begin on your behalf without your consent, but this requires a petition by three creditors. When this happens, a stay results against you and everything you own which means that no further forms of action may be taken against you.


What’s Next?

After the stays against your property have been placed, a number of things will happen to get your affairs in order and fairly compensate your creditors.

• An interim trustee is appointed to you.
• Your creditors are notified of your bankruptcy status.
• A month after filing, your creditors hold their first meeting to ensure that you have honestly and fully disclosed all of your assets through your interim trustee.
• Your trustee liquidates your property.
• Your assets are distributed amongst your creditors.
• A discharge hearing declares which debts have been dissolved and which are still in place as well as how those remaining debts will be paid and when.

After the hearing, you must make payments according to the schedule you agreed upon at the hearing but other than that, you are free to rebuild your life and your credit as you see fit!


Will I Lose Everything I Own?

Not everything. Individual debtors have the right to claim some of their household property as exempt from collection and liquidation. Certain items with strict regulations are stipulated by federal and state departments as allowed to be claimed as exempt. However, 75% of the United States have legislation ‘opting out’ of federal exemptions, requiring debtors to choose from the state allowed exemption possibilities only.


How Long Will The Bankruptcy Process Take?

It depends. In simple cases where there are no pre-bankruptcy issues and no need for the trustee to go through the process of tracking down and claiming large amounts of property, it could be just a few months. But it could take years.

No matter what, you will be considered discharged of debt during the process and an injunction against any creditors attempting to secure what you owe is put into place. You may not be prosecuted for the debt and it is illegal for you to be fired or discriminated against at work because of your Chapter 7 bankruptcy.


Am I Guaranteed That My Debts Will Be Discharged?

No. It is rare, but you may possibly be denied the right to bankruptcy based on misbehavior before the bankruptcy, including bad behavior after filing. Some things that will keep you from bankruptcy include:

• Fraud
• Concealment of property
• Failure to obey lawful court orders after filing
• Failure to respond to material questions about your case
• Previous bankruptcy within the six years previous

Some debts are exempt from being discharged even though you may have many others taken care of through Chapter 7. Some of the debts that may be exempt from discharge include:

• Debts obtained through false financial statements
• Credit card usage
• Alimony or child support
• Drunk driving fines
• Willful injury to property or person
• Student loans
• Recent tax obligations