| CHAPTER 7 |
Under Federal Bankruptcy statute, release of the debtor from personal liability for specified types of debts is called a Discharge. In other words the debtor is no longer required by the law to pay any debts that are discharged.
Invoking the Discharge Statute comes under Chapter 7. This acts as a permanent order towards the creditors of the debtors that refrains them from taking legal action. |
| Although the debtor is revived from the personal liabilities regarding the debt, a valid lien (charge upon specific property to secure payment to a debt) that cannot be avoided in a bankruptcy case will remain. Therefore, a secured creditor can enforce the lien. |
| Chapter 7 is also often referred to as Liquidation of bankruptcy code. Here a trustee is appointed by the court to administer the case and determine whether or not it is feasible to collect the exempted property. Chapter 7 can discharge your debt and can keep your property from the hands of creditors. |
| Bankruptcy can be filed by anybody as there is no minimum amount to be owed by the debtor. |
| Bankruptcy allows the debtor to protect certain amount of property from the creditors. This can be done under the provision of certain state and federal laws. It can stop garnishments and other collection funds and they can be returned to the debtor if properly exempted. |
| When a debtor files for bankruptcy, the Bankruptcy Court immediately issues by operation of law an order to all creditors to cease collection efforts. This order is called "The Automatic Stay". The order becomes effective as soon as the bankruptcy petition is filed by the debtor. Most debtors are able to protect all of their property when filing a chapter 7 bankruptcy. Bankruptcy lawyers can assist a debtor in exempting property from creditor action. |
| Bankruptcy can help to repair the credit rating by discharging, or wiping out, all of the debt associated with the negative credit report. Credit is usually provided based upon a debtor's debt to income ratio. Debt to income ratio is simply amount of debt vs. amount of income. When a bankruptcy is filed, the debt portion of the fraction is reduced to zero. |
| Once debtor files chapter 7 bankruptcies, the debtor cannot file another chapter 7 for six more years. Creditors realize this and are apt to lend credit to recently discharged debtors. Creditors will often charge a slightly higher interest rate on loans given to debtor's who have filed bankruptcy. |
| Chapter 7 bankruptcy has no repayment plan. Debtors do not have to repay creditors unless the debtor voluntarily decides to repay the creditor. Debtors usually decide to voluntarily repay secured debt such as car loans and home mortgages so they can keep
the property. Chapter 7 debtors are only able to keep property that is properly exempted. |
