Chapter 7 Bankruptcy and Discharge of Debts
How Chapter 7 Works
Using a Chapter 7 bankruptcy can mean being debt free in as little as 100 days from filing with the court. Unlike other types of bankruptcy, once the case is completed unsecured debts such as credit cards, medical bills and civil judgements are discharged and no more money has to be paid to the creditors. In other words, in just 100 days, you may be able to be debt-free with a Chapter 7 bankruptcy.
How does a Chapter 7 work? In short, the court sells off non-exempt assets, pays off creditors, and then waives the remaining debt. In over 95% of the Chapter 7 cases the court takes none of the debtor’s property as they are all exempt. Once bankruptcy is finished, the individual doesn’t have to pay any more on the debts discharged during bankruptcy.
What debt can be discharged in Chapter 7?
Most unsecured, consumer debts can be discharged, or wiped out, in a Chapter 7 bankruptcy. There are some exceptions and rules to what kinds of debts you can discharge in Chapter 7 bankruptcy but for most individuals, Chapter 7 may get rid of most of their debts.
Debts that may be able to be discharged with Chapter 7 include:
- Credit Card Debt
- Medical Bills
- Personal Loans, including from family and friends
- Past Due Utility Bills
- Accounts with Collections
- Bounced Checks
- Auto Accident Claims, excluding drunk driving
- Business Debt
- Past Due Rent and Leases
- Civil Judgements
- Taxes (Federal Income taxes that are less than 3 years old are not dischargeable)
- Charge Account Debt
- Social Security Debt
- Veteran Assistance Debt
Debts that usually can’t be discharged with Chapter 7 include:
- Child Support
- Student Loans, except in rare cases
- Criminal Judgements, including traffic tickets and criminal restitution
- Federal Income Taxes that are less than 3 years old.
- Any damages caused by a motor vehicle while intoxicated
- Stop repossession (Chapter 7 can eliminate the debt but not a lien)
Do I have to sell my house, my car, or my property in Chapter 7?
Every individual’s case and situation is different. Consulting with an experienced bankruptcy attorney can help you better understand your options and if Chapter 7 is right for you.
In a Chapter 7 bankruptcy, there are things you can protect from bankruptcy that are called exempt property. Property that can be sold in the bankruptcy is called non-exempt. The goal of selling non-exempt property is to give the debtor a fresh start—which is difficult to do when life’s essentials aren’t met.
Can I keep my house in Chapter 7?
You may be able to keep your home in Chapter 7 bankruptcy if the equity you have in the home is less than the homestead exemption or you don’t have equity at all.
If you own a home, however, Chapter 7 may not be the right kind of bankruptcy for you. It’s important to note that Chapter 7 does not permit you to keep your home and not pay for it. For individuals who have owned a home for a number of years, they may want to consider a Chapter 13 bankruptcy over a Chapter 7.
Want to keep your home in bankruptcy? We offer free twenty minute strategy sessions to talk about your individual case and what your options are when it comes to keeping your home.
Can I keep my car in Chapter 7?
There are three main options for trying to keep your car during a Chapter 7 bankruptcy: taking an exemption, reaffirming the debt, or redeeming the car.
If you’d like to keep your car in Chapter 7 without having to pay the debt, it will depend on how much you owe on the vehicle and the motor vehicle exemption you may be able to take.
Reaffirming your car loan instead of wiping it out in bankruptcy, or saying you’ll continue to make payments on your car, can also be an option in Chapter 7 to keep your car. Considerations that may got into reaffirming your debt include things like whether or not you’ll be able to pay the car loan after bankruptcy, the amount you have left to pay, and other personal finance considerations. You’ll continue to be liable for the debt after bankruptcy if you decide to reaffirm your debt.
Want to keep your car through Chapter 7? Call our experienced Bankruptcy attorney to talk about your individual financial situation and find out your options for keeping your car in Chapter 7 bankruptcy. We offer free 30 minute strategy sessions to talk about your bankruptcy case.
How fast is Chapter 7?
From gathering paperworking, attending pre-filing counseling, filing, completing a financial management course, and waiting for debts to be discharged, Chapter 7 can be completed in as little as 100 days. Chapter 13, on the other hand, requires a repayment plan that can take years to finish.
Having an experienced bankruptcy attorney can help you through the process more quickly by helping you prepare the right documents before filing more easily.
Want to get started? Call us today for your free twenty minute bankruptcy strategy session with experienced bankruptcy attorney John E. Dunlap.