Filing Under Chapter 7 of the Bankruptcy Code

PLEASE NOTE:  The information contained in these pages should not be construed as legal advice.  It is merely a brief overview of what you can expect.  Bankruptcy is a complex process with many details.  You should consult our offices for a full analysis of your situation to determine if bankruptcy is right for you.

An Overview

Chapter 7 of the Bankruptcy Code is commonly referred to as the “Liquidation” Chapter.  The general concept behind this type of filing is that all of a consumer’s debts are discharged in exchange for any property that the consumer owns and is unable to protect.

Consumers are frequently able to protect all of their property.  The Bankruptcy Code provides for certain exemptions to protect the consumer’s equity in their property.  Equity refers to the value of the property less any liens or other secured interests in such property.  The amounts that can be protected vary depending on the type of property.  You should contact our offices to receive a full analysis of your property situation.

The Discharge

A Chapter 7 Bankruptcy will discharge you from your debts that are deemed to be “dischargeable.”  The Bankruptcy Code sets forth several debts that are not dischargeable including but not excluded to certain taxes, certain education loans, domestic support obligations, etc.  These types of debts will survive the bankruptcy and the consumer will remain liable on such.  It is very important that you provide our offices with all of your debts so that we may properly advise you as to the expected outcome for each debt.

Another important item regarding the discharge is its effect on mortgages, auto loans and other secured debts.  While the personal liability of such debts may be discharged under Chapter 7, the property still secures the debt.  In other words, if the consumer that has been discharged under Chapter 7 were to default on a mortgage, the mortgage company could still institute foreclosure proceedings to take possession of the real property.  To avoid such actions, it is important for the consumer to keep the payments on secured debt current even during the bankruptcy process.

Is Chapter 7 Right for You?

Only a complete analysis by our attorneys can determine if a Chapter 7 filing is right for you.  If the consumer is behind in mortgage payments, auto loans, etc., they may wish to file under Chapter 13 to avoid loosing their property.  Also, if the consumer’s income is too high, they may need to file under Chapter 13.