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Chapter 7 Bankruptcy

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy filing, a debtor is allowed to claim as exempt certain property free from the claims of their creditors. Any property the debtor is unable to protect is then sold (“liquidated”) by the Chapter 7 trustee to repay a portion of the debtor’s obligations.

Frequently, no property is liquidated in a Chapter 7, as most debtors are able to protect all of their property free from the Chapter 7 trustee. If the trustee is unable to sell any of the debtor’s property, the case will stay open around four-five months, with the debtor’s discharge (the signed order from the Bankruptcy Judge legally eliminating most of their debts) being entered at the time the case closes.

 

What are the risk and considerations?

  • All individuals who file for Chapter 7, with limited exceptions, must complete the “Means Test.” This test gauges an individual’s ability to be able to repay their debts. If an individual has too much income, such that they “fail” the Means Test, that individual has two options, either have their bankruptcy dismissed, or convert their case to Chapter 13.
  • Certain debts are not eliminated with a Chapter 7 bankruptcy, these include: recent taxes, student loans, equitable distribution/alimony/child support owed to a former spouse. Some of these debts that cannot be eliminated in a Chapter 7 — recent taxes, equitable distribution to a former spouse — can be eliminated in a Chapter 13 bankruptcy.
  • Any property that is not listed in your bankruptcy cannot be protected by you and will be sold by a Chapter 7 trustee. Also, a Chapter 7 trustee inherits certain “strong-arm” powers that can allow the trustee to avoid improper mortgages and liens, or go after individuals or family members who you have given away property to, or family members who you have given/repaid money to in the past 12 months. It is important to speak with an experienced Chapter 7 attorney to better understand any issues with regard to your situation.

Contact Cape Fear Debt Relief today and speak with an experienced attorney to find out if you are able to protect your property from your creditors in a Chapter 7

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Cape Fear Debt Relief is a debt relief agency and helps people file for bankruptcy relief under the Bankruptcy Code.

No information that you obtain from this website is legal advice, nor is it attended to be.

You should consult with an Attorney for individualized advice regarding your own unique situation. No attorney-client relationship is formed between Cape Fear Debt Relief and you by viewing this website. 

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