Understanding Chapter 7 Bankruptcy
Chapter 7 Bankruptcy
If you have considered filing for bankruptcy, it is important to understand that there are actually two different types of bankruptcy. They are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is the most common form of bankruptcy. In this type of bankruptcy an individual’s assets may be liquidated in order to pay off at least a portion of the money that is owed. In some instances, certain types of debt may also be eliminated. Chapter 7 bankruptcy is also sometimes referred to as ‘straight bankruptcy.’
What can I Keep under Chapter 7 Bankruptcy?
This is a common question among individuals considering Chapter 7 bankruptcy. When you file a petition for this type of bankruptcy, you will be allowed to keep certain types of property. The limits on the property which you are allowed to keep depend on the state in which you declare bankruptcy.
Typically, most of your valuable possession will be claimed and then liquidated in order to repay at least a portion of the debt. A trustee is appointed to handle the liquidation process. Once all of the assets which are eligible have been liquidated and the creditors have been able to recoup at least some of their losses, you may be able to apply for a discharge, which will assist in eliminating remaining debt.
Which Debts are Eligible under Chapter 7 Bankruptcy?
It is important to understand that there are some debts which are not eligible for a discharge under this type of bankruptcy. These types of debt include alimony, tax-related debts, child support and student loans.
Recent Changes in Chapter 7 Bankruptcy Law
Recently, there have been significant changes that have occurred in bankruptcy law which you should be aware of. Courts have taken a much stricter stance on enforcing bankruptcy rules regarding who is eligible to file for Chapter 7 bankruptcy.
Generally, if you are able to make what are considered to be reasonable payments over a period of five years, then you will need to file for Chapter 13 bankruptcy rather than Chapter 7 bankruptcy. A means test is applied to determine whether you can pay at least a minimum of $100 per month every month for a period of five years. If you are able to do so, then you will typically need to file Chapter 13 and have your debts adjusted instead.
How Long will Chapter 7 Bankruptcy Remain on my Credit Record?
When you file for Chapter 7 bankruptcy, it will stay on your record for a period of ten years.