Chapter 7 Bankruptcy

Filing for bankruptcy relief under chapter 7, called liquidation, is what most people think of as “claiming bankruptcy” or “filing for bankruptcy”.  In chapter 7 bankruptcies filed for individuals, the debtor essentially provides a list of everything he or she owns and owes to the Trustee.  There are certain exemptions that apply to protect, among other things, home equity, personal jewelry, clothes, household goods, cars, and so forth.  Any property that is not exempt is then sold, or liquidated, for the benefit of creditors.  The key is “equity”, which is the value of the property less anything that is owed to a creditor for that property. 

 In a chapter 7 bankruptcy, many unsecured debts are absolutely discharged.  This includes credit card debt, medical debt, personal loans, certain old taxes, old utility bills, etc.  In addition, personal liability on secured loans (mortgages, car loans, and any other loan that has attached collateral) is discharged though the right to the collateral generally remains intact.

 Some kinds of debt, however, cannot be discharged in bankruptcy.  These include student loans, debts for domestic support (alimony or child support), certain kinds of taxes, debts incurred by fraud or deception, debts for death or injury caused while driving or operating any kind of vehicle while intoxicated or under the influence, and certain other debts which your attorney can discuss with you.

 Despite these limitations, however, if you are struggling to pay your daily living costs, facing judgments or garnishments, or otherwise struggling to deal with your debt, bankruptcy may be a good option to moving on with your life.  Please fill out our evaluation form, email us, or call to schedule a free consultation to see if bankruptcy is a good option to restart your financial life.