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CHAPTER 7
Chapter 7 is liquidation, also known as “straight bankruptcy.” The law allows you to keep your property such as a home, cars, household goods, clothing etc. within certain limits, called exemptions, and the bankruptcy trustee may sell any assets above those limits to pay your debt. Most people file Chapter 7 because they don’t have any assets above those limits, so there is no actual liquidation in such “no-asset” cases. Chapter 7 is nice and fast—if all goes well, the bankruptcy court typically will issue an order, called discharge, a couple of months after you filed your petition, legally forgiving you any debt that can be forgiven.
Chapter 7 is ideal for people who owe a large amount of unsecured debt such as credit cards, medical bills, utility bills and unsecured loans without a lot of assets. If you have a car loan or mortgage that you feel you cannot afford to pay, you can also give up the car or house without owing anything. As said earlier, filing Chapter 7 doesn’t necessarily mean that people will lose their homes or cars. Consult your attorney for details.
Any individual is eligible for Chapter 7 as long as he or she is not barred by law from doing so. Under certain circumstances, however, some debts may not be discharged, and some people may not be able to receive a general discharge. Consult your attorney to see any of those exceptions apply to you.
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