Chapter 7 Bankruptcy
(also called liquidation of
property)
If bankruptcy had a drive through window, it would
be called Chapter 7. Chapter
7 bankruptcies are quick, decisive and cheap.
Key elements of the Chapter 7 bankruptcy include the following:
- Short
duration, usually over in 120 days.
- Unsecured
debt can be discharged (you never have to
pay it back). Unsecured debt is debt that does not require
collateral (for example, credit card debt).
- Secured
debt cannot be discharged, but it can be exempted and retained
provided timely payments are made over the duration of the
bankruptcy. The amount that can be exempt varies from state to
state. Secured debt requires collateral (for example, home loans
and car loans).
- Some
debts cannot be discharged: 1) most federal and state taxes, 2) debt
created by fraud, 3) debts not listed by you in your filing papers,
4) debts arising from embezzlement or larceny, 5) debts for alimony,
6) debts for liability for willful and malicious injury, 7) debts
for fines and punishments, 8) debts for educational loans, 9) debts
for liability for driving while under the influence, and 10) debts
denied or waived in a previous bankruptcy performed in the last six
years.
- Chapter
7 bankruptcy can only be declared once every six years.
Chapter 7 is probably the best bankruptcy option
for anyone meeting the following profiles:
- You
have high levels of credit card debt (unsecured debt) and minimal
property that is defined as secured debt (houses, cars, etc.).
- You
have high levels of credit card debt and live in a state with
generous bankruptcy exemptions, so you can protect most or all of
your property that is defined as secured debt.
- You
have high levels of both secured and unsecured debt, but you have a
steady job and after discharging your credit card debt (unsecured
debt) you will be able to continue to make payments on all secured
debt.
 This profile of Chapter 7 bankruptcy is based on
current laws. Once
President Bush signs the proposed bankruptcy reform bill into law,
Chapter 7 bankruptcy will not be possible for most individuals.
For more information regarding personal bankruptcy, click on the
link below.
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