Law - Chapter 7 Bankruptcy

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Chapter 7 bankruptcy aims at giving a fresh start to a person who is too heavily burdened with debt to discharge it in a norm  al manner. Since chapter 7 completely wipes out his debts, it is also known as a 'liquidation bankruptcy' as opposed to chapter 13, which is known as 'repayment' bankruptcy. This is because the debtor has to make some payment in chapter 13, whether whole or partial, to discharge his debts. Since in chapter 13, the payment plans are approved by the bankruptcy court, the creditors have to accept whatever is paid to them.

In chapter 7, however, unsecured loans are completely discharged and the debtor has to pay only the secured loans, such as car loans or home mortgages. This makes it possible for him to retain his physical assets. In chapter 7, the debtor can only keep the property which is legally exempted. Chapter 7 bankruptcy law cases are usually decided within a period of four to six months from the date the petition is filed.

The court appoints a trustee, usually a lawyer, who helps administer justice. He examines the documents of the debtor to ensure that he is not hiding any economically feasible property or trying to exempt it from being sold to pay of his debts. He holds meetings between the debtor and his creditors to examine his actual assets or his capability to pay off his debts.

Chapter 7 has a certain eligibility criteria for those who file for it. You may be an individual, a married couple, or a businessman, either a sole proprietor or a partner. Moreover, under the  chapter 7 bankruptcy law, you can file for bankruptcy once in six years. Another condition is that if your petition for filing for bankruptcy has been dismissed in the preceding 180 days, you cannot file for bankruptcy under chapter 7. Also, you have to be very honest about your debts and assets both to the court and creditors. If found otherwise, your petition will be dismissed by the court.

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Refinancing - Chapter 7