How Does Chapter 7 Bankruptcy Really Work?

The purpose of Chapter 7 Bankruptcy is to help people facing a financial crisis get rid of as much debt as possible, and to do it quickly in order to give them a chance at a fresh start.

Why Chapter 7 Bankruptcy?

Under a Chapter 7 Bankruptcy, there is no maximum limit on how much debt a person may have. An experienced Bankruptcy attorney will be able to tell you if you are eligible to file for Chapter 7 Bankruptcy and whether your debts are dischargeable.

What Information Will A Bankruptcy Attorney Need?

Before you file for bankruptcy, you will need to gather numerous financial documents, including:

• a schedule of assets and liabilities
• detailed information regarding your income and expenses and other pertinent documentation.

Your bankruptcy attorney will ensure that all necessary documents accompany your bankruptcy petition.

The Chapter 7 Bankruptcy Process

Trustee Assigned

When you file a petition under Chapter 7 Bankruptcy, the court appoints a Trustee to oversee your case. The Trustee is responsible for protecting the interests of your creditors and ensuring that all applicable rules and regulations are followed.

Meeting of Creditors

Within approximately 1 month after your petition is filed, a meeting of creditors will be held. At this meeting, you will be asked questions regarding your current financial situation. Based on the answers you provide, the Trustee will advise the court on whether you are eligible for protection under Chapter 7.

Liquidation

If the court determines that you are eligible for protection under Chapter 7, the Trustee will sell off (or "liquidate") all of your non-exempt assets in order to pay your creditors (what is considered "exempt" may vary depending on your state).

Discharge

Typically, a discharge order is issued 2-3 months after the meeting of creditors is held. While creditors do have the right to object to a discharge in court, once the discharge is obtained you are no longer liable for that debt.

Conclusion

While Chapter 7 bankruptcies are often resolved quickly, it is imperative that you obtain the counsel of a qualified bankruptcy attorney. Your attorney will help you gather information for your petition, file your petition, and represent your interests during the meeting of creditors and in court.