Chapter 7 Bankruptcy
What is a Chapter 7?
Chapter 7 allows a person or business to completely eliminate most debts. Once the DEBTOR receives a DISCHARGE then the debts (with some exceptions) scheduled in Bankruptcy no longer need to be repaid.
By comparison, a Chapter 13 Bankruptcy may require you to repay certain of your debts over the course of time to the extent you are financially able.
I am facing a FORECLOSURE, can a Chapter 7 help?
Once a Bankruptcy case is filed foreclosures, repossessions, civil judgments, wage garnishments, etc. those proceedings must stop. However, some debtors may be able to request that the Court allow them to restart these proceedings.
Who is a "Debtor" under the Bankruptcy Code?
The DEBTOR is a U.S. Citizen or Business that has filed for Bankruptcy. A debtor must have resided in the state where the debtor is filing the Bankruptcy for at least 180 days. Generally, if the debtor has not resided in that state for 180 days then the debtor must file in the state where the debtor has resided or has had his or her principal place of business or which has been the location of his or her principal assets for the majority of the last 180 days (see 28 USC 1408)
Can I file a Chapter 7?
Any U.S. Citizen or Business can file Chapter 7 with some limitations. First, if a Debtor has received a discharge under Chapter 7 or Chapter 11 within 8 years before the present case is filed then that Debtor cannot file for Chapter 7. Second, if a Debtor has received a discharge under Chapter 12 or Chapter 13 within 6 years before the present case is filed then that Debtor cannot file for Chapter 7. Third, if your income level exceeds the median income for the State in which you reside for your family size, you may not qualify.
Why a Chapter 7 instead of a Chapter 13?
There are several reasons to file for a Chapter 7 instead of a Chapter 13. One, you may not have any regular income, which would preclude you from completing a Chapter 13 case. Two, your debts may be too high for you to qualify for a Chapter 13 case. Three, your debts may be mostly unsecured debts, such as credit cards, or while you may own a home, you may not be interested in retaining ownership of the home.
How long does a Chapter 7 take?
A typical Chapter 7 can last up to 4 months.
Can I eliminate tax liabilities?
Some taxes are dischargeable, especially if the taxes relate to tax returns filed more than three years before the Bankruptcy case is filed.
What is a security interest?
If you have a vehicle or a house it is more than likely that you took out a loan with a bank or other creditor in order to purchase the asset. In order for the creditor to lend you the money to purchase the asset it would have required you to execute documents (e.g. deed of trust) that evidenced its right to take the asset if you stop paying. In this instance the creditor is said to have a "security interest" in the collateral.
In Chapter 7, what happens to the assets that I own which are subject to a security interest?
When you file for bankruptcy you have a few choices regarding assets that are secured, such as: (1) surrendering the asset to the creditor, (2) redeeming the asset by immediately paying the value of the property, or (3) reaffirming the debt and continuing to make the payments remaining for the balance of the debt.