What is Chapter 7

Chapter 7 of the United State Bankruptcy Code (Title 11) is designed to eliminate most debts within 3 months of the initial filing date. The legal term for eliminating your liability on your debts is called DISCHARGE.

Certain debts cannot be discharged like most taxes, child support, obligations awarded in a property settlement (Divorce decree), criminal penalties, restitution and in most cases, guaranteed student loans. If the debt is secured by collateral such as an automobile or your home, in most cases you must continue to make your payments if you do not wish to surrender the collateral.

Once your case is filed with the Court, the debtor receives the Automatic Stay of Proceeding. In other words, all collections actions against you like garnishment, foreclosure and harassing phone call must stop. Getting rid of your debts (Discharge) is just one part of Chapter 7. The other part is known as LIQUIDATION. When you file a Chapter 7 case the Court does have the authority to sell your property and used the proceeds to pay off your debts. However, in most cases filed liquidation does not occur because Bankruptcy law does allow you to exempt or "shield" a certain amount of your property from liquidation.