Chapter 7 Bankruptcy – What Is Chapter 7?

29 Jan Chapter 7 Bankruptcy – What Is Chapter 7?

There are two different types of bankruptcy cases that are usually used by people who need help ending their bill problems – Chapter 7 bankruptcy and Chapter 13. Chapter 7 bankruptcy is designed for individuals (and married couples) who can’t pay their bills. The typical Chapter 7 client is someone whose income minus their regular average monthly expenses (not including debt payment) yields no money left over. This type of case would be appropriate where average income over the past six months (called “current monthly income”) minus expense allowances yields an amount that falls within certain guidelines.

Under Chapter 7, a trustee takes control of all property that is not specifically exempt; you get to keep many types of property because the law lets you keep it. In return, the court allows you to wipe out many types of debts. Generally, you will be able to wipe out the following types of debts:

  • credit cards
  • store cards
  • medical and dental bills
  • unsecured personal loans
  • certain taxes

There are other types of debts that may be able to be discharged (wiped out). It’s useful to realize that the vast majority of people who file Chapter 7 bankruptcy get to keep all of their personal belongings – in some states, people who file Chapter 7 may also be able to keep a home and a car. You should always talk with an experienced bankruptcy lawyer when making a decision to file any type of case.

As far as what you get to keep, the laws differ from state to state. In New York (which is where I practice), you would be able to keep most of your possessions.

For people who may not qualify or would lose significant assets, Chapter 13 might be an alternate means of ending your bill problems. The qualifications for Chapter 13 are different, and the benefits to this type of case may well outweigh the burdens.

Jay S. Fleischman is a bankruptcy lawyer with offices in New York and Los Angeles. In addition to helping his clients get out of debt, he sues bill collectors and credit reporting agencies for violations of non-bankruptcy consumer protection laws.

Related Posts Plugin for WordPress, Blogger...
The following two tabs change content below.
Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
  • Jim
    Posted at 15:21h, 13 May

    I Was a sole proprietor for 10 years (chiropractor). I went back to school because of failing business and have continued to pay back the debt (18000 credit card and 22000 business loan). With my student loans, mortgage and car payments I can no longer pay these previous debts. What should I do? My student loans carry a monthly payment of almost 2000 and my mortgage is 2200. My current salary is 112000 with 3 young kids and a spouse to care for I don’t have much left over. Any suggestions for paths to look into. Thanks, Jim

  • Shirley
    Posted at 09:40h, 31 May

    A good and informative post, well-researched one. Thank you for the details.

  • Diana Manville
    Posted at 16:11h, 17 June

    Why do people buy cars & homes when they cannot afford them. I am sorry for the failing economy, but so many people lives so far outside of their means and don’t think about a rainy day. Not meaning to be uncompassionate, and it’s hard to not have a job with 4 dependents! So many people are hurting.

    • Brett Weiss, Maryland Bankruptcy Attorney
      Posted at 16:24h, 17 June

      Most people can, in fact, afford their cars and homes when the buy them. Unfortunately, it is usually an illness, job loss or divorce that causes a change in their ability to pay.