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About Chapter 7 Bankruptcy


Chapter 7, also often referred to as a "Liquidation Bankruptcy," is designed to provide a Fresh Start for individuals who are so overwhelmed with debts that they are unable to repay all of their creditors without significant hardship. While most debtors in Chapter 7 are able to retain all of their assets through properly use of bankruptcy exemptions, Chapter 7 does require that non-exempt assets of the debtor be liquidated by a court appointed Trustee for the benefit of creditors.

A Chapter 7 Discharge Order eliminates most of the debtor's personal debts, to the extent that such debts are not reaffirmed. Reaffirmation agreements may be entered into which allow the Debtor to continue to be liable for secured debts and to retain the assets securing such debts (such as vehicles or homes encumbered by liens for which the debtor makes regular payments).

Not everyone is eligible to file for Bankruptcy under Chapter 7. There are several eligibility requirements that must be met under the 2005 revisions to the Bankruptcy Code, including a "Means Test." However, despite many rumors, many people who would benefit from it are actually eligible to file for Bankruptcy protection under Chapter 7!

A typical Chapter 7 Bankruptcy normally takes approximately three to four months from the date of filing until the date of Discharge Order, although some cases may take longer. Once the case is filed with the federal Bankruptcy Court, an "Automatic Stay" goes into effect, which prohibits creditors from contacting the debtor or taking any other action to collect from the debtor without approval from the Bankruptcy Court.

Chapter 7 Bankruptcy is a real option for most debtors who have average or lower than average annual incomes and whose overwhelming debts are comprised primarily of the following:

Credit Card Balances

Medical Bills

Most Civil Court Judgments

Deficiency Balances