An Overview of Chapter 7 Bankruptcy

Chapter 7 Bankruptcy, A liquidation bankruptcy cancels your debts, but you might have to let the bankruptcy court execute some of your property for the profit of your creditors. Chapter 7 bankruptcy refers to the chapter of the federal statutes that contains the bankruptcy law. The main objective of modern bankruptcy laws and practices in the United States is to reorder debtors in financial trouble.

Chapter 7 of the Bankruptcy Code provides for liquidation proceedings to be administered by the bankruptcy cell of the district courts. This means that debtors revolve over all non excused property to a case trustee assigned by the court. The case trustee then sells & converts all the properties to cash & pays back the creditors.

Chapter 7 bankruptcy can be filed by any one, who is a resident of USA and has a business or property in U.S. Chapter 7 bankruptcy can not be filed by any person, who has been granted debt discharge by Chapter 7 within the last 6 years and who has completed a repayment plan under Chapter 13 and whose bankruptcy filing was dismissed for cause within the last 180 days and who tries to hide, transfer or destroy his properties in order to defraud his or her creditors or the court trustee assigned in the chapter 7 case and who is not truthful about his financial condition or business transactions and who defies the orders of bankruptcy court or doesn't answer questions asked to him.

Not all debts are dischargeable by Chapter 7 bankruptcy. Some of the debts that are not considered under Chapter 7 like Child support, Taxes, Liability for injury or death caused from driving in an intoxicated state, Student loans, Criminal fines or penalties, Non-dischargeable debts incurred from a previous bankruptcy. Apart from the debtor side, they must know that the parties are involved in the proceedings of bankruptcy like:

1. Bankruptcy Judge: Presides over any hearing & takes control of any disputes related with the case.

2. Court trustee: Responsible for administering the proceedings.

3. Creditors: Anyone claiming that the debtor owes money to them.

The main target to achieve in Chapter 7 for the debtors is to:

1. Removes Community Debts: This is applicable for divorcees. Removal of dischargeable community debt, however, doesn't mean that you are cleared of the debts. This implies that the debt is transferred from your account to your ex-spouse's account.

2. Removes lien: There are conditions for removal of certain liens under Chapter 7 bankruptcy. However, bankruptcy court order is needed for such removal. Under Chapter 7 one can get liberate of debts for federal income taxes only if no tax lien is recorded and tax return must be due for at least3 years and should not have records of skipping tax payments.

3. Stops foreclosure: Chapter 7 filing allows one to prolong a foreclosure of agreement for home mortgage, until the discharge from bankruptcy is received. The lender can also apply to the Court & request for relief from automatic stay. The best way however is to make a personal deal with the lender to keep such assets.

4. Stop Collector harassment: After filing bankruptcy under Chapter 7, the court usually notifies your creditors. The collectors can not keep on calling or contacting you after this. However, if this continues, the Creditor may have to take up the liability for court sanctions & attorney fees.

5. No matter how harsh the consequences, bankruptcy may come, in the long run, but there are certain restrictions to this procedure. Two of these restrictions are worth mentioning: First is immediate Job loss: According to bankruptcy laws, debtors applying for protection under bankruptcy can not be sacked from jobs on this pretext. This kind of discrimination is however prohibited by U.S. Code, Sec. 525. Employers are also not notified legally about this. However this is not applicable if your creditor is your employer and second is put you into jail. Chapter 7 bankruptcy filing can in no way cause imprisonment and put debtors behind the bars.