Chapter 7 bankruptcy is typically used to discharge debt, such as credit cards and medical bills. Chapter 7 bankruptcy is sometimes referred to as a “liquidation” or “straight” bankruptcy. In most personal bankruptcy cases, no property is taken from as it is fully encumbered by liens or is exempt. The purpose of chapter 7 is to provide a “fresh start” to a debtor.
A chapter 7 case is started with the filing of a petition and schedules with the Bankruptcy Court. The filing of a bankruptcy petition constitutes an “order for relief” under chapter 7. Married persons may file jointly with their spouse.
Chapter 7 or 13
A person’s complete financial and legal situation needs to be evaluated carefully in order to make the correct decision of whether chapter 7 or chapter 13 bankruptcy is best for a person considering filing for bankruptcy relief. Filing under chapter 7 when it is not appropriate can lead to unfortunate consequences.
Chapter 7 bankruptcy would generally be the right choice for you if all of your property is “exempt” and your household income is below-median. Generally, you would not file under chapter 7 if you would face the liquidation of assets by a chapter 7 trustee.
Timetable Chapter 7
case begins with the filing of petition and schedules with Bankruptcy Court
“Creditors’ Meeting” held about six weeks after case filed
Discharge Order issued about five months from date case filed
Discharge of Debt
All debt is discharged except “non-dischargeable” debt or if discharge denied.
Non-dischargeable debt includes generally student loans, child support, alimony, and some taxes.
Eligibility for Chapter 7
Individuals, partnerships, corporations, and other business entities are eligible to file for relief under chapter 7. With certain exceptions, an individual is required to receive credit counseling, which may be over the internet, from an approved credit counseling agency prior to filing.
Chapter 7 Trustee
Upon the filing of a chapter 7 case, the U.S. trustee appoints a chapter 7 trustee to administer and liquidate any nonexempt assets. A chapter 7 debtor is required to cooperate with the chapter 7 trustee and to provide any requested financial records. Assets that are “exempt” are not subject to administration by the chapter 7 trustee.
Between 21 and 40 days after the bankruptcy petition is filed, a creditor’s meeting – sometimes referred to as a “341 meeting” – is held by the chapter 7 trustee. In the majority of personal bankruptcy cases, no creditors attend. During the creditors’ meeting, the trustee and creditors may ask the debtor questions regarding his financial affairs and property. Bankruptcy Judges do not attend creditors meetings.
Discharge of Debt
Subject to certain exceptions, a discharge releases the debtor from personal liability from most pre-bankruptcy debt and enjoins the creditors from attempting to pursue collection actions against the debtor. Certain types of debt are not dischargeable in bankruptcy, including debts for alimony, child support, certain students loan, and certain taxes. In addition, the discharge of a particular debt or the overall discharge may be denied under certain grounds.
Miami chapter 7 bankruptcy attorney Jordan E. Bublick has filed over 8,000 chapter 7 and chapter 13 bankruptcy cases.