In situations when debts have reached a level beyond your ability to repay or service them, Chapter 7 is usually preferred to Chapter 13 bankruptcy or to debt consolidation because it completely eliminates all debts, with very limited exceptions including child support and alimony, some government debts and possibly educational loans. Because chapter 7 bankruptcy wipes out all or nearly all of the outstanding debts, it is known as straight bankruptcy. It immediately places you under protection of the Bankruptcy Court putting stop to all creditor actions (automatic stay) and usually within about 4 months ends with discharge of all debts. Chapter 7 bankruptcy is a quick and very effective way of handling debts that got out of control.
Chapter 7 bankruptcy is also known as liquidation because debtor’s assets valued above the limits provided by the law may be seized and sold by the bankruptcy trustee to pay off the creditors. In reality, most individual Chapter 7 bankruptcies end successfully with discharge of all debts and without loss of any assets because the debtor’s limited assets are fully protected by available exemptions. To see if your qualify to effectively and efficiently eliminate your debts in Chapter 7 bankruptcy, contact our office at (847) 297-9977 or email us at [email protected] for a strictly confidential consultation.
The individuals who do own assets valued more than the available exemptions, or individuals whose income is too high to qualify for Chapter 7 bankruptcy, may have an option to still file for bankruptcy to discharge a substantial portion of their debts under Chapter 13. Some individuals actually may prefer to file for bankruptcy under Chapter 13 in order to reach a desired result that may not be attained in Chapter 7 bankruptcy, e.g. effectively dealing with real estate mortgage arrears.
Chapter 7 Procedure
Chapter 7 bankruptcy process usually lasts approximately 4 months from the date of petition filing until the order of discharge is issued. A credit counseling course must be completed before Chapter 7 bankruptcy petition can be filed and another course called debtor education has to be completed while the case is pending. After the petition is filed, the case is assigned to a bankruptcy trustee and a meeting with the trustee is scheduled within the 4 to 8 weeks window from the date of filing. This meeting is called a “meeting of creditors” because the creditors may (although in most cases are unlikely to) attend it and “341 meeting” after the Bankruptcy Code section number. This meeting gives the bankruptcy trustee a chance to ask questions to make sure that the information provided in the petition is true, complete and accurate and that the petitioner has no assets that could be liquidated to pay at least some portion of the debts. This meeting is conducted under oath and usually lasts only a few minutes. Provided that the trustee files “no assets report” and within 60 days after the meeting with the trustee none of the creditors files any objections, the Bankruptcy Court will issue the “order of discharge” and close the case.
To see if you qualify to effectively and efficiently eliminate your debts in Chapter 7 bankruptcy, contact our office at (847) 297-9977 or email us at [email protected] for a strictly confidential consultation.