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What IS CHAPTER 7?Chapter 7, sometimes referred to as a “full” or “complete” bankruptcy”, is basically a court-supervised liquidation program. In a chapter 7, the court appoints a trustee who has authority to liquidate the assets of the debtor. Theoretically, the Chapter 7 trustee uses the liquidation proceeds to pay the debts. As a practical matter, most chapter 7 debtors will not see any of their assets liquidated. That’s because many assets – such as used furniture and clothing – have little or no liquidation value. Some assets – usually homes or cars – are collateral for a loan. If the price of the asset is less than the loan amount, the asset has no value to the bankruptcy trustee, and the trustee will not liquidate the asset. Furthermore, certain assets are exempt from liquidation. In other words, even if a particular asset has value, if it is exemption the debtor gets to keep that asset. In a chapter 7, most debts can be wiped out. Certain debts, such as child support obligations, student loans, and some taxes, do not get wiped out. The debtor will have to deal with those debts after the chapter 7 bankruptcy process is finished. Chapter 7 is probably appropriate for…Chapter 7 is therefore usually appropriate for debtors whohave primarily consumer loans, and whose assets are minimal, or if they have substantial assets, the assets are exemption. Chapter 7 is probably not appropriate for…Because chapter 7 is a liquidation program, it is generally not the best option for people whose equity in their home exceeds their homestead exemption. Furthermore, chapter 7 may not be the best option for debtors who have equity in assets that exceeds the exemption allowed under the law. If you have a home mortgage or car loan, you should also consider filling Chapter 13 to see if you can use the bankruptcy laws to help you keep your car or your house.Because certain debts - such as domestic support obligations and certain taxes - are not discharged in bankruptcy, debtors who have such debts may want to talk to a bankruptcy attorney about the possibility of filing a chapter 13. A skilled bankruptcy lawyer may be able to propose a plan to pay the debts off over five years, while wiping out all other debts. If you have a home mortgage or car loan, you should also consider filling Chapter 13 to see if you can use the bankruptcy laws to help you keep your car or your house. Contact us now to schedule a free comprehensive consultation to determine the ideal solution for you. |
The Fuller Law Firm, A Professional Corporation
Bankruptcy Attorneys
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