What is Chapter 7 Bankruptcy?
Chapter Seven Bankruptcy is a type of bankruptcy that is designed to totally remove all your debt and start you over with a clean slate. Bankruptcy courts work with you and your debtors to reach an agreement that requires debtors to halt any attempts to collect on the debts you owe them. The agreement also states that the assets you do retain, whether they are in property, ownership, or funds, can all be examined by the court as possible items for liquidation so debtors can recover as much of the value of your debts as possible. This is why Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy." This type of bankruptcy aims to convert any non-essential assets you have into repayment items.
In liquidation, Chapter 7 bankruptcy allows you to select property that you are eligible to keep according to a list of state or federal exemptions. The bankruptcy court will provide you with both lists; you should seek qualified advice when deciding which list to follow and determining which items you own that qualify. While chapter 7 bankruptcy seeks to commit you to giving over any value that you do have to your creditors, it is not designed to impose crippling measures on you. For example, the bankruptcy court will not deem it proper to repossess your car when you are using the car to get to a job so you can continue working.
Once you file for chapter7bankruptcy, the bankruptcy courts appoints an individual known as the "trustee" to supervise your case. There is a hearing known as a "meeting of creditors" that usually takes place around one month after your bankruptcy has been filed. This meeting is to allow the trustee to review your legal forms and ask any questions related to your filing. Even though the name of this hearing implies that your creditors will be present, the fact is that they are seldom actually at the meeting. If you have any non-exempt property at the time of this meeting, you are usually obligated to turn over the property ownership or its cash equivalent to the trustee. These meetings, while they might seem intimidating, are usually brief and very to-the-point. They get the following stages of your bankruptcy processing in order, and usually within 3 to 6 months of this meeting you will receive official notice from the court that all of your debts have been discharged. This signals the closure of your chapter 7 bankruptcy case.