Chapter 7 Bankruptcy is best suited for individuals and companies with financial difficulties, who do not have the ability to pay their debts in any reasonable amount of time.
Chapter 7 Bankruptcy is filed in an effort to resolve or extinguish the debts of the company or individual. Immediately following the filing of a Chapter 7 Bankruptcy, the debtor (the individual or company filing the bankruptcy) is granted “relief” from their creditors. The automatic stay provisions of the Bankruptcy Code are invoked and prevents/prohibits creditors from pursuing the debtor at any time or place. This means that once these provisions go into effect creditors may not do the following:
• send bills
• make collection calls
• file lawsuits
• garnish wages
• levee income
or take any other action to collect debts
For example, a judgment may not be taken against a debtor even though a lawsuit may have already been filed against the debtor.
A Chapter 7 Bankruptcy is typically filed for an individual or company who can no longer pay their bills as they are due because of loss of income due to
• lay-off, job termination
• declining business or economic downturn
Incurred debts for individuals are dischargeable under Chapter 7 Bankruptcy, however, businesses are not granted a discharge, instead creditors are prevented/prohibited from pursuing the debtor any further after the Bankruptcy has been filed.
Even if a Chapter 7 Bankruptcy is filed certain secure debts can be reaffirmed or extended through the Bankruptcy if it is the desire of the debtor to maintain or keep the item which is collateral for a loan or debt.
However there are certain types that may not be discharged which include:
• most taxes
• child support
• student loans
• court ordered fines
• debts obtained through fraud or deception
It should be noted that all assets and property as well as all debts and liabilities must be listed in the Bankruptcy Filing in accordance with the Bankruptcy Code. Creditors cannot request or require you to repay debts that have been discharged through a Bankruptcy, but under certain circumstances one may keep property that has been purchased subject to a security interest such as a home, motor vehicles or other personal items. An attorney should review and analyze your economic situation in order to determine if any alternatives are available. A Chapter 7 Bankruptcy filing remains on your credit record for a period of ten years. However an attorney can provide further information on re-establishing your credit.