Chapter 7

Chapter 7 Bankruptcy

What is a chapter 7 bankruptcy case and how does it work?

A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the Bankruptcy Code. Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. The Bankruptcy Code is a federal law that deals with Bankruptcy. A person who files a chapter 7 case is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.
What is a chapter 7 discharge?

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.
How does a person obtain a chapter 7 discharge?

A chapter 7 discharge is obtained by filing and maintaining a chapter 7 bankruptcy case and is being eligible for a chapter 7 discharge. However, not all debts are discharged by a chapter 7 discharge. Certain types of debts are by law not dischargeable under chapter 7 and debts of this type will not be discharged even if the debtor receives a chapter 7 discharge
Who is permitted to file and maintain a chapter 7 case?

Any person who resides in, does business in, or has property in the United States is permitted to file a chapter 7 bankruptcy case except a person who has intentionally dismissed a prior bankruptcy case within the last 180 days.  To be permitted a chapter 7 bankruptcy case a person must qualify for chapter 7 relief under a process called means testing.
What is a presumption of abuse and how does it affect the case?

When a chapter 7 case is filed by an ineligible person, under bankruptcy terminology that person is said to have abused the chapter 7 laws. When a person whose current monthly disposable income is such that he or she can afford to make monthly payments to unsecured creditors in the required amount, a presumption of abuse is said to arise in the case. If a presumption of abuse arises in a case, the case will be dismissed or converted to chapter 13 unless the person filing the case can prove the existence of special circumstances, such a a serious medical condition.
Who is eligible for a chapter 7 discharge?

Any person who is qualified to file and maintain a chapter 7 case is eligible for a chapter 7 discharge except the following (see 11 U.S.C & 727):

1) A person who has been granted a discharge in a chapter 7 case that was filed within the last 8 years.
2) A person who has been granted a discharge in a chapter 13 case that was filed within the last 6 years, unless 70 percent or more of the debtor's unsecured claims were paid off in the chapter 13 case.
3) A person who files and obtain court approval of a written waiver of a discharge in the chapter 7 case.
4) A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the chapter 7 case.
5) A person who makes false statements or claims in the chapter 7 case, or who withholds recorded information from the trustee.
6) A person who makes false statements or claims in the chapter 7 case, or who withholds recorded information from the trustee.
7) A person who fails to satisfactorily explain any loss or deficiency of his or her assets.
8) A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.
9) A person who, after filing the case, fails to complete an instructional course on personal financial management.
10) A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation.
What types of debts are not dischargeable in a chapter 7 case?

All debts of any type or amount, including out-of-state debts, are dischargeable in a chapter 7 case except fro the types of debts that are by law nondischargeable in a chapter 7 case. The following is a list of the most common types of debts that are not dischargeable in a chapter 7 case:

1) Most tax debts and debts that were incurred to pay nondischargeable federal tax debts.
2) Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement, if the creditor files a complaint in the bankruptcy case.
3) Debts not listed on the debtor's chapter 7 forms, unless the creditor knew of the bankruptcy case in time to file a claim.
4) Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the bankruptcy case.
5) Debts for domestic support obligations, which include debts for alimony, maintenance, or support, and certain other divorce-related debts, including property settlement debts.
6) Debts for intentional or malicious injury to the person or property of another, if the creditor files a complaint in the bankruptcy case.
7) Debts for certain fines or penalties.
8)  Debts for most educational benefits and student loans, unless a court finds that are not discharging the debt would ilmpose an undue hardship on the debtor and his or her dependents.
9) Debts for personal injury or death caused by the debtor's operation of a motor vehicle, vessel or aircraft while intoxicated.
10) Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.
Share by: