Chapter 7 Bankruptcy Laws – a Guide
Filing under Chapter 7 bankruptcy laws has perhaps one major advantage, and one major disadvantage.
Probably the most positive and favored aspect to the chapter 7 bankruptcy laws is that an individual emerges completely free of liability for any debt (although there are some exceptions). The negative aspect is that just about all an individual’s worldly possessions have to be sold to compensate creditors as far as possible, whereas chapter 13 bankruptcy requires no such liquidation.
An individual’s credit record will retain notice of a chapter 7 bankruptcy for a period of 10 years, chapter 13 for 7.
Unlike chapter 13, chapter 7, once filed with the court, affords the individual protection under what is called “automatic stay”.
This protects the individual in that any creditor may no longer contact the individual directly to seek repayment of debt, even if a foreclosure notice has been served.
Outstanding student loans and government tax are just two examples of debts that cannot be written off under any type of bankruptcy, and have to be repaid regardless.
In this case a Chapter 13 filing may be more appropriate, one difference being is that Chapter 13 works out a repayment schedule.
Chapter 7 procedure is as follows:
1. An individual will be requested to list all assets (with values) and details of income. In addition, all debts must be listed, and to whom they are owed.
2. Bankruptcy forms once completed should be deposited with the nearest Federal court.
3. The “order of relief” is then issued which then prohibits even a phone call by your creditors demanding payment.
4. Approximately one month later the court will notify the individual of the “341″ meeting that it is compulsory for you to attend. This gives the creditors the chance to check that you are unable to meet your debts to them, and are not merely trying to avoid payment. Once satisfied, the discharge will be approved.
5. This is where a Trustee is appointed to oversee the liquidation of the individal’s non exempt assets, which are duly sold.
6. After approximately 2 – 3 months the discharge is granted by the court and a discharge notice issued.
7. On receiving the discharge notice, all personal liability for any discharged debt is removed, and no further action can be taken by creditors against the individual or their exempted property.
Nearly all cases result in a discharge for the individual concerned.
Grounds for denying a discharge under chapter 7 bankruptcy laws are:
1 Failure to produce proper financial records
2. The individual tried to hide personal assets from the court.
3. The individual committed a bankruptcy crime.
4. An order of the bankruptcy court was broken.
5. If any property has been removed, hidden or transferred that belonged to the individual’s estate.
If property has been found to have been hidden, transferred or destroyed subsequent to the discharge, that discharge may be quashed.
Sometimes, items that an individual is still paying for, such as a classic motorcycle, can be kept by the individual, using a process called “reaffirmation”.
This simply means that a written agreement is made and filed with the court, in which the seller and debtor agree that the item may be kept as long as repayment s are maintained.
Alternatives to Chapter 7 are Chapter 11 and Chapter 13.
Chapter 11 is useful if you are in business and wish to avoid liquidation, while Chapter 13 allows you to retain your personal property.
Indeed, you may be forced into Chapter 13 if it is found that you have the financial means to effect a workable Chapter 13 financial repayment plan.
If you would like more information on Chapter 7 bankruptcy laws and other aspects of bankruptcy, including rebuilding your financial position after bankruptcy, visit www.howtoclaimbankruptcy.net.
Tags: Bankruptcy, insolvency, Liquidation of assets, Personal Bankruptcy, personal Insolvency
