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Chapter 7 Bankruptcy Frequently Asked Questions

1. Disclaimer:

This article deals with Chapter 7 bankruptcy. Each state has its own bankruptcy laws, so you need to check with your state for details. If you need information regarding Chapter 13 bankruptcy, go to our article "Chapter 13 Bankruptcy Frequently Asked Questions ". The information contained in the following FAQs is provided for general information purposes only and is not intended to be a legal opinion nor legal advice nor is it intended to be a complete discussion of all the issues related to the area of Chapter 7 bankruptcy. Every individual's factual situation is different and you should seek independent legal advice regarding specific information. - Return

2. What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor then receives a discharge of all dischargeable debts. - Return

3. Who can file a Chapter 7 bankruptcy?

  • You must reside or have a domicile, a place of business, or property in the U. S. or a municipality.
  • You must not have been granted a Chapter 7 discharge within the last 6 years or completed a Chapter 13 plan.
  • You must not have had a bankruptcy filing dismissed for cause within the last 180 days.
  • You must have completed a debt counseling class within the past 6 months.
  • You must pass this means test .

4. Is it true that I can eliminate all my debt?

The underlying purpose of bankruptcy law is that the honest debtor who is in debt beyond his/her ability to repay the debt should be given a fresh start through the discharge of debts in a bankruptcy proceeding.

Not all debts are dischargeable. Generally speaking, the following debts will not be discharged: taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving

while intoxicated; non-dischargeable debts from a prior bankruptcy; student loans; criminal fines and penalties and forfeitures. Here is a more specific list of non-dischargeable and dischargeable debts .

Those debts which are secured will be discharged, however, expect the creditor to take the necessary legal steps to take back the property. In most cases, if the debtor's equity interest in the property is exempt, the debtor may retain the property by redemption or reaffirmation. - Return

5. Do I have to go through credit counseling before filing for bankruptcy?

Yes, at least six months prior to filing your Chapter 7 bankruptcy petition, you must get credit counseling from a government approved organization. You can find a state-by-state list of government approved credit counseling organizations at U.S. Dept. of Justice. In addition, you must also complete a financial education course prior to filing for CH 7 BK. - Return .

6. What are the most common reasons for filing bankruptcy?

The most common reasons for bankruptcy are: owning a business that failed, losing your job and can't pay your bills, large medical expenses, marital problems and other large unexpected expenses. Most people do not just run up their credit cards irresponsibly with the expectation that you can just wipe out the debts in a bankruptcy.  People who file bankruptcy have an enormous amount of debt and will not be able to satify their creditors in years to come. - Return

7. Will bankruptcy stop the bill collectors from calling?

Yes, one of the major benefits of filing for protection under Chapter 7 is that many creditor actions are stayed. This means that debt collection efforts and foreclosure is halted.

Once a creditor or bill collector becomes aware that you have filed for bankruptcy protection, he/she must stop all efforts to collect the debt. After your bankruptcy is filed, the court mails a notice to all the creditors listed in your schedules. This usually takes a couple of weeks. If this is not soon enough, then you should have your representative inform the creditor immediately.

Category: Payday loans

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