CHAPTER 7 BANKRUPTCY

WHAT IS A CHAPTER 7 BANKRUPTCY?

Chapter 7 is usually used if most of your debt is unsecured debt. There are three kinds of debt for bankruptcy purposes; secured, unsecured, and priority. Secured debt is debt secured by some type of asset, such as a home, vehicle, furniture, appliances, electronics (computers, VCRs TVs), or lawn equipment. Priority debt consists of Federal Income Taxes that are less than three years old, child support, and some property taxes. Unsecured debt includes debt such as credit card debt and medical bills.

CAN I KEEP ALL OF MY PROPERTY?

Important to every Chapter 7 bankruptcy case is a determination, before the case is filed, as to whether or not the persons filing bankruptcy will lose any of their property. The Bankruptcy Code provides that certain property can be claimed as exempt and retained by the individuals filing the bankruptcy. Property that exceeds the amounts allowed for exemption could be declared non-exempt, and may be sold by the Bankruptcy Trustee to obtain money to pay your unsecured creditors. It is very important to discuss with an attorney that specializes in bankruptcy law the specific amounts of property allowed to be claimed exempt in your specific circumstances. An individual with non-exempt property can often be helped with his debts by filing a Chapter 13 Debt Reorganization Plan without the risk of losing his non-exempt property.

HOW WILL FILING A CHAPTER 7 BANKRUPTCY AFFECT MY CREDIT?

A major concern that most people have is the extent to which their credit will be affected by filing a Chapter 7 bankruptcy. The filing will be reflected on your credit rating. That however is not the main issue. It is important to recognize that your underlying financial problems are the real cause of your negative credit, not the bankruptcy. Actually, filing a Chapter 7 bankruptcy can be the first step in reestablishing your credit. There are two reasons for this. First, you can file a Chapter 7 only once every eight (8) years, and the lenders know this; so, once you have filed, they know you cannot file another Chapter 7 to discharge your debt owed to them. Second, you have put yourself into a much better position financially to pay them since you have obtained a discharge from all of your unsecured debt.

WHAT IF I WANT TO PAY A PARTICULAR CREDITOR AFTER BANKRUPTCY?

A debtor may repay as many dischargeable debts as desired after filing under Chapter 7 bankruptcy. By repaying one creditor, a debtor does not become legally obligated to repay any other creditor. The only dischargeable debt that a debtor is legally obligated to repay after filing a Chapter 7 is one for which they and the creditor have entered a reaffirmation agreement, which is completely voluntary.