Chapter 7 Bankruptcy

One of the biggest misconceptions with regards to Chapter 7 Bankruptcy is that debtors lose all of their personal and real property. Most debtors retain ownership of their assets after discharge of their debts provided that there is no equity in their assets which can be liquidated by the Trustee. The bankruptcy court will appoint a trustee who will collect the debtor’s non-exempt assets, sell them and distribute the proceeds to the creditors.

Chapter 7 bankruptcy provides a debtor the chance to abolish their debt obligation to receive a fresh start. Typically, a debtor filing for Chapter 7 bankruptcy has no disposable income by which their debts may be repaid and, although Chapter 7 may sound like a better option since it essentially removes debt and does not require repayment in the future, it may require the liquidation of all of the debtor’s non-exempt property, the proceeds of which will be distributed among the creditors. The goal may be to liquidate the debtor’s assets however, the federal and state governments allow for reasonable exemptions on property you may own. In addition, if you have to let the bank foreclose on the property you may want to consider trying some like a Rent to Own Homes Listings to see if you list your house to sell on a land contract rather than having a smear on your credit report.

Chapter 7 is the most common type of bankruptcy and is often the quickest. The Chapter 7 bankruptcy process takes about four to six months costs $299.00 in filing and administrative fees and often requires that the debtor make only one appearance in court (341 meeting or meeting of the creditors). In addition, the debtor must complete two credit counseling classes, before filing bankruptcy and after filing bankruptcy. This class is intended educate filers about how future bankruptcies may be avoided. These classes can only be taken at a government approved provider. To manage this process, the bankruptcy court will appoint a local trustee who will collect all of the debtor’s non-exempt assets( if they have any), sell them and distribute the proceeds to the creditors.