Chapter 7

Chapter 7 Bankruptcy, also called liquidation, is the most common and popular type of bankruptcy. It is the easiest and quickest form of bankruptcy, and completely eliminates certain debts forever. These debts are commonly referred to as “dischargeable” debts.

Advantages of Chapter 7

1. You discharge most of your debts, and are able to start again without a deficit budget.
2. All collection and garnishment attempts stop.
3. You can usually choose before you file what property will be exempt, and therefore what you will keep.
4. If money problems had been seriously affecting your psychological well-being or your marriage, these problems may be relieved by filing a bankruptcy petition.
5. You can fulfill any ethical or moral obligation you feel by voluntarily repaying or making a partial repayment to anyone after your debts are discharged or by reaffirming that debt.
6. It is generally the easiest, quickest, and least expensive form of bankruptcy.

Dischargeable debts

Examples of debts that are typically dischargeable in Chapter 7 are:

• Medical bills, including hospital and doctor fees.
• Back rent, telephone and utility charges that are in arrears.
• Bank, credit union, signature loans, veterans' assistance loans and finance company loans.
• Revolving credit such as MasterCard, Visa, American Express and oil company credit cards.
• Attorneys, legal and court fees.
• Overdrafts or deficiency balances on bank accounts.
• Record or book clubs.
• Storage fees, leases and rentals.
• Most debts owed due to a car accident.
• Most business debts.

Debts not “discharged”

Certain types of debts cannot be eliminated through a Chapter 7 discharge including student loans, child support, alimony, and most taxes.

Eligibility for Chapter 7

Not everyone is eligible for a Chapter 7 discharge. Some examples of ineligibility are:

• Your income is too high.
• You filed a Chapter 7 in the last 8 years and received a discharge.
• You are not an individual.
• You intended to hinder, delay, or defraud your creditors.

Creditor collection

After you file a Chapter 7, you are immediately protected by the powerful “automatic stay.” The automatic stay is the provision of the bankruptcy code which stops or prevents creditors collection actions (including repossession, garnishment, foreclosure, etc.). Once a Chapter 7 is filed, creditors are not supposed to engage in collection efforts. Harassing telephone calls, threatening letters, and pending lawsuits are “stayed” and must cease and desist.

Keeping your assets

In most cases, you can keep assets that are necessary for your support and maintenance. California allows you to protect much of your property through the exercise of

“exemptions.” There are several exemptions, and numerous limitations, so it’s important to examine the applicable exemptions closely and know what the limitations are for your assets. You have to continue making your car payments and mortgage payments if you want to keep your house and car.

How long does the process take?

After your case is filed an informal hearing is scheduled within 30-45 days. After that hearing, creditors have 90 days to file any written objections to your case. Assuming no objections after that period expires (objections are rare,) the court will issue a discharge and the process is complete.

Credit Counseling and Financial Management

PRIOR to filing there’s an on-line or telephonic credit counseling class that you must take or your case will be dismissed. AFTER filing, you must take a financial management class in order to obtain a discharge; this can also be taken on-line or over the phone.

At American Debt Relief, we believe that no one should have to deal with the burden of debt by themselves. Our firm is here to provide the legal assistance and the individual attention that will help you with your financial future. Contact Attorney Leonard J. Ackerman today for a Free Consultation!