By Henry Paloci
Licensed in California and Florida
In Chapter 7 — which many people call “straight bankruptcy” but is more correctly called a “liquidation” case — you basically give up all your assets, and in return you get out of all your debts. It is a gross oversimplification, obviously, but it exemplifies the difference between Chapter 13 and Chapter 7.
A Chapter 13 case was created to get a wage earner who has the means pay at least some sum of money toward her debts, also it supplies to get a debtor to develop An Agenda to settle portion of her debts back over an interval of time — typically 36 or 60 months, with respect to the debtor’s situation. You simply walk away.
Of course, you do not give up “all of your assets” in Chapter 7. Specific assets are exempt, meaning you can maintain them. By way of example, individuals in California who dont own a homestead (or if their house does not have any equity) can claim wild card exemptions of just over $ 23,000. What this means is nt even contain retirement accounts. does the first $ 23,000 of your assets cannot be taken in Chapter 7 and that Most of our customers would not have to be concerned about giving up anything in Chapter 7.
Likewise, you’re not relieved of all of your debts either: some debts, like student loans, can virtually never be released. Others, like income taxes, may be released under conditions that were limited. And debts which have sprung up as a result of fraud or intentional tort (like, for instance, the O.J. Simpson civil ruling) are usually nondischargeable.
A Trustee will likely be made to your own case. When you are in insolvency the trustee is responsible for your bankruptcy estate and commands all of your assets. The trustee will ascertain whether you’ve some non-exempt assets, and, in the event that you do, will liquidate those assets and distribute the proceeds to your own creditors.
A release is an order entered by a U.S. Bankruptcy Court Judge that eternally prevents lenders from taking any actions to collect on your private obligations existing at the time you filed for bankruptcy. The release is the order you want and is the reason bankruptcy file. Typically it takes 4-5 months in the time of submitting before you get your dismissal. Following the Court decides which you are eligible to get a Chapter 7 discharge the judge will issue a release. Normally you may not need to appear before the judge in Chapter 7.
Specific requirements have to be satisfied for filing in Chapter 7. You might not be allowed in the event that you’ve got the cash after assembly expenses to settle your unsecured lenders to file under Chapter 7. Iff that’s the case a Chapter 13 bankruptcy might not be inappropriate. Other demands exist but listing them would make this FAQ large.
Most of my Chapter 7 customers do not pay or give up anything in liquidation because they do not have anything to begin with. We generally support those customers to contemplate Chapter 13 when my customers do have assets that they would like to retain through bankruptcy, and those assets cannot meet into an exemption.
In Chapter 7, you’re usually permitted to keep assets that guarantee a loan (like to get an automobile or house) provided that you will be present in the payments. In the event that you would like to make sure that it remains in Chapter 7 you’ll need to surrender or catch up the payments on a guaranteed asset.
Chapter 7 is usually the easiest & most streamlined of the types of insolvency that consumers might contemplate. Chapter 7 has limits, although it will take less time and costs less in lawyers fees. Chapter 7 is not going to be right for you personally whether you bring in a lot of money, have a capability to settle your debts (even if only a tiny number), or if you’re behind in your house or auto and need to keep it. And in the event you’d like to use an alternative in bankruptcy including redemption reimbursing the fair market value of house or a vehicle instead of that which you owe before you think about filing Chapter 7, you’ll certainly wish to analyze the advantages of refunding over 3 or 5 years in Chapter 13.
Chapter 7 is the most effective option for lots of men and women. Even though it is possible to file Chapter 7 the types are easily accessible as it’s simple to create an error in your disclosures or exemption elections that costs a lot more as opposed to lawyer would have cost in the very first place, I strongly discourage this practice.
Disclaimer: This is general knowledge rather than legal counsel. Please consult an expert in your authority for guidance particular to your own circumstances.
Henry Paloci is an attorney practicing property law and bankruptcy law since 1997. Henry Paloci is licensed in Florida and California. To find out more visit http://www.cleanstartbankruptcy.com
More Chapter 7 Bankruptcy Articles