Chapter Seven Bankruptcy Is Straight Bankruptcy or Liquidation

Written by Adam Peck Category: Nursing Homes January 23rd, 2013 2 min read

People who live or have a business or property in the United States can file for Chapter 7 bankruptcy in a federal court. Chapter 7 is straight bankruptcy or liquidation.

Some property can be exempt from chapter 7. Most liens including real estate mortgages and security interests for car loans survive. Other assets, if any, are sold or liquidated by the U.S. trustee to repay creditors. Many types of unsecured debt are legally discharged by the bankruptcy proceeding, but there are various types of debt that are not discharged in a Chapter 7. Common exceptions to discharge include child support, spousal support, , divorce settlements, income taxes less than 3 years old and property taxes, student loans and court fines.

A chapter 7 bankruptcy stays on your credit report for 10 years. While in some cases this may make credit less available, high debt can have the same effect, and in some cases, a person’s credit score may even rise after declaring bankruptcy, which removes debt. Future ability to borrow may therefore be improved, harmed or remain the same.

Like other bankruptcy chapters, it is not available to individuals who have had bankruptcy cases dismissed within the prior 180 days under specified circumstances.

Another reason why a person’s Chapter 7 bankruptcy application may be denied is if it is determined that the debtor’s bankruptcy filing is abusive because the person is thought to be able to pay off the debt.

The U.S. Trustee can prevail in a challenge to the debtor’s Chapter 7 filing by proving that the debtor can otherwise afford to repay some or all of his debts out of disposable income in the five year time frame provided by Chapter 13.

It is generally believed by most California bankruptcy lawyers that the U.S. Trustee has become much more aggressive in pursuing abusive bankruptcy filings. As a result, changes were made in recent years that require a means test, credit counseling and other requirements before bankruptcy can be filed and approved.

Though bankruptcy law is the same across the United States, each bankruptcy court has its own rules to some degree. In California, there are severla Bankruptcy Districts.

If you decide to hire a bankruptcy attorney, and you should, you will need to bring the following documents to your bankruptcy lawyer: taxes, pay stubs, automobile and real estate titles, real estate appraisals, mortgages, deeds, leases, divorce agreements, child support orders, financing and security agreements, credit reports.

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Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.