Chapter 7 is a specific type of bankruptcy category. It is also called "liquidation bankruptcy." It involves the discharge (cancel) of most of the person’s debts. This allows the person to get their footing while they recover financially.
- Student loans (subject to some exceptions)
- Taxes and tax-related debt
- Spousal and child support
- Debts associated with DUI charges
- Criminal fines
- Any debt not stated in the Chapter 7 filing petition
Chapter filings may also require the person to sell (i.e. "liquidate") some of their property, with the profits going towards some of the debt accounts.
Who Can File for Chapter 7 Bankruptcy?
Both individuals and businesses can file for Chapter 7 Bankruptcy. To qualify for Chapter 7, the filing party must meet certain requirements. For instance, they must be below a minimum amount of disposable income. They must also be in a situation where they are unable to repay their creditors.
Also, there are limitations involving waiting periods for filing bankruptcy multiple times. If a person has filed for Chapter 7 bankruptcy, they must wait 8 years until they can file again under Chapter 7.
How Does Chapter 7 Bankruptcy Compare to Other Types of Bankruptcy?
The two most common types of bankruptcy filings are Chapter 7 and Chapter 13. As mentioned, chapter 7 involves a discharge of the person’s debt. Chapter 13 involves a restructuring of the person’s finances and debt accounts. Chapter 13 allows the person to begin repaying their creditors, often at a lowered monthly payment rate.
Chapter 7 and Chapter 13 may have different effects regarding taxes and other issues. Chapter 13 is generally more favorable in terms of credit ratings, but Chapter 7 may be more helpful for relieving financial burdens.
Do I Need a Lawyer for Help with Chapter 7 Bankruptcy Issues?
Filing for Chapter 7 bankruptcy can be a major project. It involves an evaluation of all of a person’s finances and assets. You may need to hire a bankruptcy lawyer if you need assistance with a bankruptcy filing. Your attorney can help inform you of the benefits and potential drawbacks associated with Chapter 7 bankruptcy. Also, your lawyer can be with you to provide representation during the formal hearings.