What is a Chapter 7 Bankruptcy ?

 

Chapter 7 bankruptcy is called a "liquidation bankruptcy".  Liquidation because a person appointed in accordance with the Bankruptcy Code, called a Chapter 7 Trustee, is responsible for collecting and selling your non-exempt assets to pay creditors.  Nevertheless, the Bankruptcy Code provides you with exemptions for certain types of property that you can use to protect the property from liquidation.

 

Under a Chapter 7 bankruptcy, most, but not all, of your debts are discharged. As an individual, you can lose some of your property (nonexempt assets) but each individual's case is unique.

 

Types of debts that can not be discharged include:

  • certain types of tax claims
  • debts not set forth by the debtor on the lists and schedules the debtor must file with the court
  • debts for spousal or child support or alimony
  • debts for willful and malicious injuries to person or property
  • debts to governmental units for fines and penalties
  • debts for most government funded or guaranteed educational loans
  • benefit overpayments
  • debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated
  • debts owed to certain tax-advantaged retirement plans
  • and debts for certain condominium or cooperative housing fees.

 

To qualify to file a Chapter 7 bankruptcy, a debtor's "current monthly income" must be less than the state median for the debtor's household size.  The Bankruptcy Code requires the application of a "means test" to determine whether the debtor qualifies to file chapter 7 bankruptcy.

 

Contact our office to schedule an appointment for a consultation with a bankruptcy attorney.