Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is the simplest and easily understood type of bankruptcy. The concept of Chapter 7 is straightforward. Debts that are dischargeable get wiped out. Non-dischargeable debts stick around. The debtor keeps assets that are protected (exempt). Nonexempt assets are liquidated. The money from the liquidation sale goes to creditors and Trustee. 

To learn about protecting your assets in bankruptcy click here

Chapter 7 vs chapter 13

Chapter 7 has some key differences from a Chapter 13. First, a chapter 7 bankruptcy is less complex than a chapter 13 bankruptcy. Second, debtors receive a discharge significantly quicker. Third, chapter 7 is less flexible than Chapter 13 and may not accomplish what you want. For instance, if you are behind on your car or house payment – Chapter 7 may not be right for you. In addition, if you have non-exempt assets, Chapter 13 may be a better fit. 

Are you eligible to file Chapter 7?

You must pass the Means Test to qualify for Chapter 7 bankruptcy. The Means Test is based on your income. If you make too much you may not qualify for chapter 7. Debtors will need to complete the second part of the Means Test to determine eligibility. The Department of Justice posts the most up to date Mean Test numbers on their website here.

 

discharge debts in chapter 7 bankruptcy

A discharge permanently wipes out a debt. Some debts cannot be wiped out in bankruptcy – to see which ones click here. A Chapter 7 discharge is subject to many exceptions, so debtors should consult with a bankruptcy lawyer before filing to discuss the scope of the discharge. 

In most cases, unless a creditor or party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004(c).

 

secured creditors in chapter 7

Car loans and mortgages are the most common types of secured creditors. You have three basic choices on how to hand them when you file Chapter 7: Surrender, Reaffirm or Redeem. Surrender is straightforward – you give the collateral back to the creditor in exchange for wiping out the debt. Reaffirm is to sign a new loan agreement. Redeem is to purchase the collateral in a lump sum.

Chapter 7 debtors must fill out a form called the Statement of Intention for Individuals Filing Under Chapter 7. This tells all parties involved whether you intend to keep or surrender property secured by a lien. A secured creditor who has a property perfected lien against the property may repossess the property unless the debtor signs a reaffirmation agreement. 

To understand the difference between secured vs unsecured debt and why it matters, click here.

SHOULD YOU FILE CHAPTER 7 or CHAPTER 13? 

Click here to learn which one may be right for you.

To speak to a skilled and experienced Kansas Bankruptcy Lawyer about Chapter 7 Bankruptcy, please give us a call at 785-727-2099 for a FREE Consultation over the phone or in person or you can contact us online.  

 
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