All About Chapter 7 Bankruptcy Code

If you are trying to decide what type of bankruptcy to file, or if you would like to be informed about the bankruptcy types, here we will learn valuable Chapter 7 Bankruptcy information. You will also learn how declaring bankruptcy under this code will affect you.

Bankruptcy is a legally declared incapacity of individuals or businesses to release their debts.  A declared state of bankruptcy could be requested not just by creditors in an attempt to get what is owed to them but also by the insolvent individual or organization.  If it becomes difficult for you to repay your debts, then declaring bankruptcy can be the right solution to debt troubles.  

Out of 6 basic kinds of under the Bankruptcy code, Chapter 7 is what can be known as liquidation of nonexempt assets to pay debts.  In a court-supervised process, a court chooses a trustee who liquidates the non-exempt assets of the debtor’s estate and distributes them to creditors.  The Chapter 7 Bankruptcy Code permits the debtor to keep certain exempt property.  However, a trustee will liquidate the debtor’s remaining assets. 

Based on the amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, if a debtor’s income is in excess of certain thresholds, the debtor might not be eligible for Chapter 7 relief.  By filing a petition under  chapter 7, it automatically stays the majority of collection actions against the debtor or the debtor’s property, but prospective debtors should understand that filing a petition under chapter seven may result in the loss of property altogether. 

After chapter 7 bankruptcy, one will no longer owe money on unsecured loans, credit cards, unpaid hospital, medical and utility bills and unpaid rent.  On the other hand, debts like state and federal taxes (unless they are older than 3 years), child support required by law; alimony, debts due to fraud, fines, government-backed student loans, penalties and debts due to willful injury to another individual or property are not eliminated by chapter seven bankruptcy. 

Only a few months after the petition is filed, in most chapter 7 cases, the debtor gets a discharge that releases him/her from personal liability for certain dischargeable debts.  Therefore, chapter 7 bankruptcy is intended to provide the debtor with a new beginning and a opportunity to live with sound financial management.