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Chapter 7
Chapter 7 is what most people think of
when they hear the
word “bankruptcy.” It is a liquidation bankruptcy, designed
to eliminate or “discharge” many kinds of debts for those
who lack the ability to repay them. In most cases, the
debtor may retain necessary assets such as his or her
home, vehicle, personal effects, and retirement funds
while eliminating other debts.
The
debtor is required to file documents with the bankruptcy court that
provide various financial information and that detail the debtor’s income,
expenses, debts, and assets. The bankruptcy court turns these documents
over to a “Trustee,” who will meet with the debtor and his or her attorney
to review all information provided by the debtor to ensure that the debtor
has complied with all requirements of the bankruptcy code and is eligible
to receive a discharge in bankruptcy.
Chapter 7
can discharge most unsecured debts, including credit card debts, signature
loans, medical debts, etc. However, certain debts cannot be discharged in
Chapter 7. Debts that are not dischargeable in Chapter 7 include,
but are not limited to:
- Federally guaranteed student loans
- Child and/or spousal support debts
- Certain federal and/or state tax debts
- Debts incurred to pay taxes that are
themselves not dischargeable
- Debts for money, property or services obtained
by means of fraud, false representation or
wrongful conduct including embezzlement or
larceny
- Debts
stemming from intentional or malicious
injury to person or property or from driving
while intoxicated
- Criminal
and/or civil fines or penalties owed
to governmental entities
- Certain
debts incurred shortly before filing bankruptcy
One
practical limitation on the ability to file Chapter 7 is your income
level. Simply stated, the courts try to reserve Chapter 7 for those whose
income level is simply insufficient to allow them to repay any meaningful
portion of their debts. Thus, your household income level has a great
deal to do with your eligibility for Chapter 7.
Chapter 7
Bankruptcies generally take from 4 to 6 months to complete and require the
debtor to make only one brief appearance at a meeting with the Chapter 7
Trustee.
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