What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy offers a way out for debtors who cannot make ends meet. A qualified debtor will obtain a "discharge," which bars creditors from taking any and all action to collect debt. Chapter 7 petitions are administered by a bankruptcy trustee who can take possession of a debtor's "non-exempt" property and distribute it among creditors. In most Chapter 7 cases, however, all property is exempt: the debtor keeps what little he or she has and walks away with a fresh start.
How does filing a Chapter 7 petition keep creditors away?
Immediately after a Chapter 7 filing, the Court notifies creditors of the petition and, upon receipt of this notice by creditors, an "automatic stay" takes effect pursuant to 11 U.S.C. § 362. The stay prevents creditors listed in the petition from taking action to collect debt or otherwise enforcing their rights. Prohibited conduct includes making phone calls, sending collection letters, filing a lawsuit, pursuing a lawsuit in progress, repossessing property, garnishing wages, attaching bank accounts, evicting tenants, and foreclosing on real property. The automatic stay lasts for the duration of the bankruptcy unless the creditor has a basis for asking the court to lift the stay, and then files a motion that is granted by the Court. When the debtor is discharged at the end of the case, the automatic stay becomes, in effect, permanent.
What property may I keep?
Debtors keep all of their property in the vast majority of Chapter 7 cases, which typically involve limited assets. The Bankruptcy Code aims to give a fresh start, not to punish. Most furniture, appliances, television sets, old cars, and computer equipment will remain in the debtor's possession. Only when the debtor's assets exceed in value what the debtor may legally keep will property (the excess) be subject to confiscation and distribution by the trustee. That which the debtor may keep is known as exempt property or "exemptions." These are set forth in 11 U.S.C.A. § 522.
To find out if you are eligible
to file Chapter 7 Bankruptcy, please enter the following Bankruptcy Means Test Calculator site below and follow the instructions.
If you pass the test, please call us for an appointment.
If you have questions, or if you would like to make an appointment, call us at +1 916 515-8025 or use our contact form.