Bankruptcy Chapter 7 | Bankruptcy Debts
Chapter 7 Bankruptcy allows a debtor to completely discharge certain debts, often on condition some assets are sold to go towards the amount owed to creditors.
Debtors, under chapter 7 are not required to sell important assets such as property or a car – which unsurprisingly makes chapter 7 the preferred bankruptcy option for most people. That is not to say, however, that chapter 7 bankruptcy exempts people from honoring payments on either a property or a car – it doesn’t.
Who is eligible for Chapter 7 Bankruptcy?
In order to file for Chapter 7 Bankruptcy, you must meet certain eligibility requirements. More...
1) You are either a small business, or an individual/married. If you file as a small business you can discharge many of your business debts.
2) You have only filed for Chapter 7 Bankruptcy once in any six-year period.
3) You have not had a previous bankruptcy case dismissed within the last 180 days
4) You have not attempted to defraud the system.
5) A judge may stipulate you file for chapter 13 bankruptcy if he/she believes you have enough assets to repay most of your debts.
6) Note: Chapter 13 does not discharge all (dischargeable) debts and only applies to secured debts under $870,000 and unsecured debts totaling $290,000.
Do might I disqualify for Chapter 7 Bankruptcy?
You will disqualify for chapter 7 should you fall into any of the three following conditions:
1) It is believed you own too many assets to qualify for Chapter 7
2) You are unable to meet the eligibility requirements under new bankruptcy laws
3) You have not been completely honest with creditors, i.e. you have hidden or otherwise concealed some assets.
Non-dischargeable Debts under Chapter 7
Bankruptcy will not discharge a ‘secured debt.’ A secured debt is a loan secured against another asset, such as your house or car.
A debt that is not listed at the time of filing for bankruptcy cannot be discharged. This holds true for a debt not supported with adequate information. If a creditor cannot be contacted due to inadequate contact information, the debt will not be discharged. For this reason it is worth recording every correspondence with creditors and noting any change in address or telephone numbers.
Other chapter 7 debts that cannot be discharged:
- Student loans except in extremely rare cases where poverty is the result of the debt.
- Tax debts, i.e. income tax or property tax.
- Alimony/child support.
- Court fine or fees.
- Drink driving fines.
- Debts disqualified from a previous bankruptcy.
Dischargeable Debts under Chapter 7
Under Chapter 7 Bankruptcy all unsecured debts will be discharged, including:
- Credit card debts
- Cable/telephone.
- Utility payments.
- Merchant credit.
It is worth noting however, that there are some exceptions that will render even your dischargeable debts non-dischargeable. There is nothing like a hint of fraudulent activity i.e., a secured loan with no intention of paying it back, to get you stuck with a load of debt.
Similarly, to consider transferring property into someone else’s name until after you have filed bankruptcy is dishonest and dangerous. To file for chapter 7 you will have to give account of any asset transfer a year prior to your bankruptcy. Failing to report a transfer is a felony.
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