All you need to know about Chapter 7

Qualifications for filing Chapter 7

In Chapter 7 bankruptcy the debtor tries to remove all his dischargeable debts. This may include credit cards, medical bills, signature loans, old utilities and other unsecured debts.

Any debtor who makes his monthly payment regularly can keep his automobiles and homesteads to himself. And in case he wishes to surrender these properties, he can do so with full satisfaction.

Exceptional cases

A debtor may not qualify for Chapter 7 due to a lot of reasons, and under such circumstances, Chapter 13 would act as an alternative. This can occur if the debtor exceeds the allowable income as determined by the means test.  If the assets of the debtor are beyond the permitted levels of bankruptcy exemptions, he is capable of filing this type of Bankruptcy, but those assets are liable to liquidation by the Trustee. If the debtor wishes to hold back those assets, he can go for filing a Chapter 13 plan. Over usage of credit cards, cash advances and fraudulent transfers or conveyances may exempt one from filing a Chapter 17 plan.

What is discharge in Chapter 7?

Discharge is the prime reason why debtors go for filing a Chapter 7 plan. This means that the debtor is no longer liable for a majority of his debts. In a successful Chapter 7 case, discharge is given to the debtor 60 to 90 days, after the first meeting of the creditors. In certain cases, when the records are inadequate or the debtor commits a bankruptcy crime, the court may deny discharge to the debtor. It is better to consult a Bankruptcy attorney who is experienced with these laws for clarifications on this subject.

The role of a Trustee

The Trustee is usually appointed to administer to happenings with the Bankruptcy case. The primary role of a Trustee is to liquidate the assets of a debtor or to sell them at auctions and distribute it among the creditors.

Pros of Chapter 7

Though Bankruptcy leaves a mark on your record over a long time, the actual process from filing to discharge takes only a few months. When deciding against Chapter 7, missed debt payments, defaults, repossessions, and lawsuits will increase the complications. Usually, state exemptions allow most properties to be exempted from bankruptcy and also allow you to keep the salary or own assets that you buy after the filing of Chapter 7. Within a year or two, a new line of credits at a higher interest could be obtained. This plan also protects the debtor from aggressive collection actions of the creditor.

Cons of Chapter 7

This type of Bankruptcy remains on your record and can ruin your credit. In certain cases, the Trustee can liquidate your assets and this can lead to loss of some of your properties. Sometimes, it may exempt you from owning credits for a few years. A proper explanation of how and why you got into this financial crisis is to be explained to the Judges as well as the Trustee.

Bankruptcy is not a permanent solution to all the debts you own. It’s just an alternative by which a new financial beginning can be made.