Chapter 7 Bankruptcy
Chapter 7, or “liquidation” bankruptcy, is available to people whose income falls below a certain limit. In this situation, a trustee is appointed by the bankruptcy court to take control of the individual debtor’s property and “liquidate” it—in other words sell it and turn it into cash. The trustee then uses that cash to pay the creditors listed by the debtor in the bankruptcy petition.
Some property, however, is exempt (in other words protected) from liquidation: the person petitioning for bankruptcy is allowed to keep the equity in his or her home, clothes, and various other types of personal belongings.
If a debtor has a steady source of income, he or she may have to (or prefer to) file for Chapter 13 bankruptcy instead.
Once a person files for any type of bankruptcy, his or her creditors are notified that they are no longer allowed to attempt to collect on their loans. If the bankruptcy process ends in the discharge (or elimination) of the petitioner’s debts, the creditors can no longer resume their efforts to attempt collection.
Chapter 7 bankruptcy does not eliminate liens that exist on property; the owners of secured debts (such as a car loan for which the vehicle itself is the collateral) may be allowed to recover their security. In addition, certain types of debts can not be eliminated through Chapter 7 bankruptcy. Among those are debts for alimony or child support, tax liabilities, and federally sponsored student loans.
In order to achieve the discharge of debts, a person must comply with a number of procedural requirements—such as providing complete information about his or her assets, debts, and monthly living expenses; presenting relevant tax documents; and completing a court-approved course on managing personal finances.
A husband and wife may file for bankruptcy either jointly or individually.
If you are considering bankruptcy, we would be glad to help you choose the option that is best for you, and guide you through the entire process.
For a free evaluation of your own unique circumstances and the best way for you to get a fresh financial start through bankruptcy, please contact our office at 408-292-4849.