What is Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy may be referred to as a "straight bankruptcy". When a debtor becomes hopelessly unable to pay debts owed, a Chapter 7 bankruptcy liquidates whatever non-exempt assets are owned and the proceeds are used to pay creditors. A trustee is appointed to collect the assets, sell them, and distribute the funds to creditors. A Chapter 7 bankruptcy often allows the debtor to "reaffirm" some debt and thereby retain possession of a home or an automobile. Most other debt is, in effect, wiped out with a Chapter 7 bankruptcy filing. Court ordered restitution and child support can not be included in a bankruptcy.

What are the most common reasons for a Chapter 7 bankruptcy?
Most people who file for a Chapter 7 bankruptcy have experienced extenuating financial circumstances. The loss of a job, serious over-extension of credit, a divorce, the death of a family member, and large medical expenses, are all reasons that a debtor may find himself considering bankruptcy.

What is the filing process?
An official petition must be filed with the courts. The debtor must also supply detailed financial information, including a listing of assets owned and a financial history. A complete listing of all property must be compiled, as well as a complete listing of all creditors with their exact addresses.

When will the Chapter 7 bankruptcy be discharged?
Approximately four to six months after the bankruptcy has been filed, most debts are discharged. When a debt is discharged, it is no longer enforceable.

What happens after Chapter 7?
A Chapter 7 bankruptcy often provides the debtor a fresh start. Even though the debts have been discharged, the bankruptcy will remain on a credit report for ten years. However, with time, the bankruptcy has less negative impact on the credit report. It is important to pay all obligations on time after declaring bankruptcy. Obtaining automobile financing and securing a mortgage loan are possible within a few years of filing bankruptcy.

This article is intended for informational purposes only, and is not legal advice. If you may need to file Chapter 7 bankruptcy, contact bankruptcy Attorney Gary R. Jodat to guide you through the process.