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Chapter 7 Bankruptcy


A Chapter 7 bankruptcy case allows debtors - clients who file for bankruptcy, to discharge, or eliminate unsecured debts owed to the creditor. An unsecured debt is a debt that does not have property or any item serving as collateral. Collateral is property that must be returned to the creditor should the debtor fall behind in payments. Because unsecured debt is not guaranteed by collateral, creditors will typically sue the debtor for failure to make payments since the debtor has no property that the creditor can repossess.

Although pending charges will cease after filing for bankruptcy with these debts, current charges will still be due to the creditor.
Secured debt, debt that has a collateral established such as a car or house, can still be kept by the debtor if the debtor files for bankruptcy and continues to make regular payments.

A typical Chapter 7 case allows a debtor to re-establish credit, gives debtors a fresh start, and allows debtors to make payments on new property in a punctual manner to prevent the occurrence late charges.  From the initial consultation to the judge granting a discharge order, a Chapter 7 case will typically last three months. The discharge order is a federal notice issued by the judge that states any remaining debt issued by the creditor no longer has to be paid back. The debt is permanently eliminated and the creditor can no longer persecute the debtor. Upon filing for bankruptcy, federal law states that the creditor must immediately cease harassing the debtor and implementing more charges onto the debtor. The creditor must cease in garnishing wages from the debtor’s bank account, calling the debtor about payments, and filing lawsuits against the debtor. If a creditor wishes to contact the debtor after bankruptcy has been filed, the creditor must speak with the bankruptcy attorney instead.  



Debts that CAN be eliminated

 Unsecured debts that may be eliminated include:

  • Medical Bills
  • Utility Bills
  • Payday Loans 
  • Deficiency Bills such as the balance due on property that has been repossessed (Car, Furniture, prior rental lease etc.). 
  • Tax debts (not all tax debts are dischargeable)
  • Credit Cards Bills  

Debts that CANNOT be eliminated

Not all debts can be discharged. These exceptions include:

  • School Loans
  •  Most Taxes owed to the IRS
  • Alimony/Child Support
  • Fraud/embezzlement
  • Criminal Fines/Penalties
  • Damages from auto accident while under the influence of drugs/alcohol