BANKRUPTCY - CHAPTER 7 BANKRUPTCY

Chapter 7 (Straight Bankruptcy)

To begin a Chapter 7 bankruptcy you file a petition with the Court requesting a complete discharge of your debts. The primary goal in a Chapter 7 is to wipe out (discharge) your debts as if they never existed. In exchange you give up your property except for the property the law allows you to exempt. In most cases, all of your property will be either exempt or not have sufficient resale value to motivate the creditor to sell. For example, the cost of your furniture usually will exceed the value if it had to be sold.

Property which is not exempt or has sufficient equity for the bankruptcy estate is sold and the money distributed to your creditors. A Chapter 7 is generally not appropriate if you have a home or car and want to keep them but are merely behind on the payments. The reason being that a Chapter 7 bankruptcy does not remove the liens against that property you gave as collateral for those loans. However, if you purchased an item for household purposes and the seller or lender took the item and other items already owned as security, you may be able to have the lien removed.