FAQs About Chapter 7 Bankruptcy

Chapter 7 Bankruptcy involves the liquidation of debts. When you file for this form of bankruptcy protection, you will turn over the nonexempt property to a trustee of the court, who will then liquidate the property in order to pay your creditors. However, for most debtors, your property is exempt and will not need to be turned over to the court.

A discharge is a release of a debt obligation by the court.

Most debts are dischargeable under Chapter 7, with a few exceptions, such as some tax debts, most student loans, alimony and child support, and for fraud or other illegal activities.

There are several reasons why you might not be eligible to file for Chapter 7 Bankruptcy. The reasons include: If you have been granted protection under Chapter 7 in the past eight years if you conceal or transfer property in an attempt to defraud your creditors or the court trustee, or if you make false statements in your bankruptcy case.

If debts are jointly owned by both spouses, then they should file jointly, to avoid a creditor attempting to collect on the debt from the other spouse at a later date.

It could make your credit rating worse. But because some of your debts are discharged in the proceeding, it might also improve it.

Chapter 13 Bankruptcy is essentially a court-supervised debt restructuring and repayment plan.

Under Chapter 13 Bankruptcy, the court has the power to prevent creditors from foreclosing on the property or attaching wages. Chapter 13 provides for legal safeguards that debt consolidation services cannot provide.

Under Chapter 7 Bankruptcy, sometimes some or all of the debtor’s nonexempt property is sold to pay off creditors. In a Chapter 13 Bankruptcy, some of the debtor’s income is used to pay off some or all of the debt over a period of three to five years.

Not necessarily. Some debts, such as those for alimony, child support, and taxes have to be completely repaid; other debts will be repaid to the extent that the debtor can afford them, based on their income.

A trustee is a person appointed by the court to administer the repayment plan agreed upon under the Chapter 13 Bankruptcy filing. The trustee collects

the payment from the debtor and pays the creditors.