Also known as liquidation or straight bankruptcy, a chapter 7 bankruptcy is a type of bankruptcy that is used to clear off a lot of unsecured debts.
Filing a chapter 7 bankruptcy has proven to be the last option heirs and beneficiaries use to straighten finances. If you are greatly lacking in bills payment and can no longer afford some money to set off your living and monthly expenses, opting for chapter 7 bankruptcy might be the way to go.
Usually, filing for chapter 7 bankruptcy means that you need to lose possessions of the things you own. This may or not impact negatively as you may no longer have something to give up to give your creditor(s).
Why is Chapter 7 Bankruptcy important?
Chapter 7 bankruptcy is important because it allows a debtor to liquidate their assets and pay off their creditors. They first start from paying unsecured debts, then gradually move over to pay the secured debts, and finally, the nonpriority unsecured debt.
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How is Chapter 7 Structured?
Filing a chapter 7 bankruptcy means that you will complete a form. You will also need to present your assets to the trustees for a thorough review.
After you file for chapter 7 bankruptcy in the United States, you will be granted an automatic stay on your debts which are usually temporary. With the automatic stay, a few things are guaranteed for you. Your creditors will automatically stop to:
- Garnish your wages
- Evict you from house
- Foreclose your home
- Turn off your utilities.
- Or Request for full payment
Everything mentioned above only lasts for a while. The court is usually in charge of taking legal possessions of any property you might tender and immediately approving your case and appointing a trustee to handle the bankruptcy.
The main purpose of having a bankruptcy trustee is for the effective review of your possessions, your finances and generally supervising your chapter 7 bankruptcy. They will sell off some of the properties and prevent you from keeping any of its proceeds as it’s specifically meant for repaying the creditors.
The trustee will also arrange a creditor meeting – where you and your creditors will come together, choose a courthouse and answer important questions regarding your filling.
Chapter 7 vs Chapter 13 Bankruptcy
Chapter 7 and chapter 13 bankruptcy are major types of bankruptcy that a lot of people face. Filing for either of them can help you set off your debts and all outstanding bills.
However, some significant differences exist between the two of them:
A chapter 7 bankruptcy can be used to clear off some of your debts in the space of some months. Notwithstanding, a trustee appointed by the court can go on to put your nonexempt properties on sale to settle your creditors. You need to have a low income to qualify for a chapter 7 bankruptcy.
With a chapter 13 bankruptcy, you are allowed to keep your possessions and opt for a more convenient repayment plan.
What Is The Lifespan Of Chapter 7 Bankruptcy?
After the filing date, chapter 7 bankruptcy gets deleted after 10 years.
How is Chapter 7 Bankruptcy Used?
A lot of people use the legal process of chapter 7 bankruptcy to aid themselves to relieve themselves from debts either by clearing or discharging some of their debts.
Qualifying for the chapter 7 bankruptcy ultimately allows you to discharge your several debts. Student loans, child support, tax debts, etc are not part of what the chapter 7 bankruptcy covers.
Synonyms for Chapter 7:
Below are other terms you can use in place of chapter 7 bankruptcy:
- Straight bankruptcy
- Liquidation bankruptcy
Who Qualifies For Chapter 7 Bankruptcy?
Usually, before you can meet a chapter 7 bankruptcy, there are a few requirements to meet:
- You need to be able to enroll in an accredited counseling agency and complete an individual credit counseling course. This should be done within at least 180 days before you file for the chapter 7 bankruptcy.
- There shouldn’t be a record stating that you have filed a chapter 7 bankruptcy within the past eight years. You can also have filed chapter 7 bankruptcy within the past eight years.
- In case you tried to file a chapter 7 and your case got dismissed, you will have to wait for 181 days before you can try again.
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What Unsecured Debts are Exempted from the Chapter 7 Bankruptcy
You must understand that certain unsecured debts are not included as part of debts when the chapter 7 bankruptcy is processed. These include:
- Student loans
- Court penalties and other fees
- Child support