Chapter 7, Straight Bankruptcy, is the basic backbone of the Bankruptcy Debt forgiveness programs. Chapter 7 was designed to let someone have the opportunity to start all over. Chapter 7 is a program designed to give a debtor a chance to start all over and is called the "fresh start" provision of the Bankruptcy Code. Under Chapter 7, you surrender all of your debts and all non-exempt property to the Court for administration. The Trustee of the Court is charged with selling all of your non-exempt property for the purpose of paying as much on your unsecured debts as possible. Once this is done, the remainder of your debt is discharged. You may receive a chapter 7 discharge once every eight years. If you receive a Chapter 7 discharge, you cannot file and receive a Chapter 13 discharge for four years. If you file a Chapter 7 petition, you will lose your rights to receive a Chapter 13 Bankruptcy Discharge for four years from the date you filed your Chapter 7 case. This right is subject to Congressional regulation. In order to file a chapter 7 petition, you must fall within certain income limitations. In the event that you do not meet these requirements, you may be forced to convert to Chapter 7.
In the event that you have mortgaged property, (i.e. your house, car, furniture), you must either enter into an agreement with the creditor to repay the debt (reaffirmation), pay the value of the property (redemption), or give back the property (surrender) within sixty (60) days of the filing of the petition or the creditor is allowed to pick up the secured property, which has been pledged for the debt. No debt may be repaid by the debtor without the authorization of the Court (reaffirmation hearing).
Chapter 7 is available for business and individuals with below median income, that just want to start all over. Provided you meet the standards of the means test, Chapter 7. Works as follows:
- We first surrender all of your debt to the Court. All debt must be initially included in a Chapter 7 case.
- We then surrender your non-exempt property to the Court. Non-exempt property is Real Estate with a value of more than $15,500, over and above mortgage value and personal property worth more than$7,750. The Court is charged with selling your non-exempt in order to pay as much to your unsecured creditors as possible.
- After the sale of your non-exempt property and the payment of money on your bills, you are going to receive a discharge from your debts.
- Discharge is a legal term that means that you are relieved of the obligation to pay any sum on the bills that you acquired, prior to the filing of your bankruptcy case. There are basically nineteen reasons that a person can be denied a discharge, however, these reasons are not really customized to all debtors.
There are drawbacks to a chapter 7 case. Generally, a Chapter 7 case will stay on your credit record for up to 10 years, with that period of time being determined by Congress. You can only file one chapter 7 case and receive one discharge every ten years, and if you file a Chapter 7 case, you might not be able to file and receive a Chapter 13 discharge in a case filed in chapter 13 within four years of your chapter 7 bankruptcy case. In the event you file a Chapter 7 Bankruptcy Petition and you become entitled to receive any inheritance, within six months of the filing of the Chapter 7 case, the inheritance that you receive would be property of the Bankruptcy Estate and would belong to the Trustee for distribution to your creditors.
Caution: In filing a chapter 7 petition, we can make no representation to you that the creditor will allow a reaffirmation of the debt you owe. The decision on reaffirmation of a debt and the keeping of your property is a matter between you and the creditor and is subject to a negotiated agreement. If you have any doubt as to the willingness of a creditor to let you keep your mortgaged property, you may want to consider a chapter 13 petition. Also, in Alabama, if the amount of your property exceeds your allowed exemptions of $15,500.00 per person on real estate and $7,750.00 per person on most personal property, the retention of personal property over exempt amounts is subject to negotiation and repurchase from the Trustee. Please understand that we cannot guarantee that the Trustee will let you keep the property at any price and this is a factor that should be considered relative to chapter 7 filings.