What exactly is Chapter 7 Bankruptcy?

Too difficult to answer in this short space.

A Chapter 7 Bankruptcy is a short process for dealing with certain types of debt. You cannot file for bankruptcy "on a credit card" or "on a medical bill." When you file for bankruptcy ALL of your assets and debts and past financial transactions are included. This includes your home and mortgage, student loans, credit cards, loans and payments to friends and family, your couch, your clothes, your cell phone. EVERYTHING. A Chapter 7 bankruptcy creates a bankruptcy estate that includes everything above (that is - EVERYTHING) as of the moment of filing. (So the the most part* after acquired assets and debts will not be part of the bankruptcy.) All "Non-exempt" assets are sold and the money is used to pay off creditors. The "Non-exempt" part is important as everything for every one of my clients has been exempt. While exemptions are on of the more complicated parts of the bankruptcy, know that California has great laws that protect a great deal of value and equity. You should consult with an attorney about your particular situation on exemptions. Once you file (and all of your assets are exempt) there is an automatic stay that takes effect that prevents all creditors from taking any action to collect against you. It is automatic and it is very powerful. An that does include your home. If there is a foreclosure it will stop the the duration of the bankruptcy process unless it is "removed from the stay." Twenty-one days or more after you file you have to go to a meeting where you say that yes, you are you and yes, you included everything and answered truthfully. Sixty days after that all of your dischargable debts go to $0 and all non-dischargable debts don't. Your personal obligation for secured debts (like car loans and mortgages) is dischargeable, but the hook the holder has on the asset is not. Your house cannot file for bankruptcy, only it's owner. The effect on secured debts in Chapter 7 is for the most part limited to the automatic stay. If you have sufficient income and past due mortgage payments, a Chapter 13 may be a better idea. Again, you'd really have to have a longer conversation with an attorney to get the details of your situation. That is the very, very, very short story. There is the credit counseling certificate, debt management course, means test, statement of intent, relief from stay, etc, etc, etc.

A chapter 7 Bankruptcy discharges a person's unsecured debt, ie credit card debt, personal loans and lines of credit.

A chapter 7 is for discharging your debts. If you own a house with equity you will be able to take one set of exemptions which may not protect your other property as well as the other exemptions. You need to talk to a lawyer.

Chapter 7 is the liquidation chapter of bankruptcy law. If you "pass" the means test and are eligible for chapter 7 bankruptcy protection, then Chapter 7 will discharge your general unsecured debts - usually credit cards, medical debts, etc. Chapter 7 and all bankruptcy chapters include all your assets (home too) and debts. Where people sometimes get confused is that Chapter 7 allows a debtor to continue making payments and keep his/her house or other secured collateral. Of course, if you are behind on payments or can't make the house payments after discharge, a Chapter 7 will not allow you to stay in the house beyond foreclosure sale.

Chapter 7 discharges the debts you would like discharged such as unsecured credit card debt and medical bills. As for secured debt, such as liened items like houses and cars, the Debtor can "reaffirm" on this debt (keep paying on it) or give back the secured item(s) and have the underlying debt discharged. Some debts cannot be discharged in Chapter 7 including student loans, child support, alimony, fines, some personal taxes, etc.

A chapter 7 bankruptcy eliminates most if not all of your debts. Houses and Cars are usually both a secured debt and an asset, so both need to be listed in your case. Please call a bankruptcy attorney to get more information on how a Chapter 7 works since the particulars will depend from case to case.

A Chapter 7 bankruptcy is defined by the Bankruptcy Code as ?Liquidation?. It is available to both business entities and natural persons (i.e., an incorporated business can file Chapter 7, but so can you). In every Chapter 7 case a Trustee is appointed to administer the ?bankruptcy estate?. The Trustee?s role is to find assets to liquidate (i.e., sell or otherwise turn into cash ? by collecting debts, pursuing litigation, etc.) in order to pay creditors back a portion of the debt that is owed to them. In the case of a business entity, the company is closed down and all the assets (or the business itself) is sold to bring money into the bankruptcy estate. Where individuals are concerned some assets *might* be liquidated to bring money into the bankruptcy estate, but in the vast majority of Chapter 7 cases filed by individuals there are no assets to liquidate. This does not mean that everyone filing for Chapter 7 bankruptcy protection is completely destitute, it is simply because there are exemptions for certain assets, and in most cases filed in Massachusetts the exemptions cover substantially all of the assets an individual owns. Your home is included in a Chapter 7 case, but that doesn?t mean that you will lose your home. In Massachusetts an individual can protect up to $500,000 of the equity in her home from becoming a part of the bankruptcy estate. That means that in most cases if you can pay your mortgage, you can keep your home, even after a Chapter 7 bankruptcy. If you cannot pay your mortgage and both you and your attorney decide that letting the house go is the best route for you, then Chapter 7 may still be the best option for you, because a Chapter 7 bankruptcy will allow you to discharge your personal liability under the mortgage note. A discharge in this case will keep the bank from trying to recover any deficiency you owe after the sale of the house at foreclosure.

A chapter 7 bankruptcy is also known as "liquidation" bankruptcy. In a Chapter 7, you look at your debts (including your mortgage, car loan, credit cards, etc) and your assets (your house, car, furnishings, money, other items of value), as well as your income and expenses, and you determine whether you can either sell or liquidate some of what you own in order to pay off a portion of your debts, or else if you have some money left over at the end of the month that you could use to pay back some of your creditors over time (i.e. moving you into a chapter 13). Any asset of yours that doesn't have a lien on it (e.g. your house or car if you have a mortgage or car loan) can possibly be sold, but every state also has some "exemptions" - amounts that, under the law, you're entitled to keep as part of your fresh start (e.g. if you own your car without a car loan, Illinois gives an exemption of $2400 per person, so if your car is worth less than $2400, you would get to keep it after the bankruptcy). If all of your property is either under a lien or exempt, then you have a no-asset Chapter 7 and you can get a discharge of your debts without liquidating anything, assuming your income is low enough to preclude a chapter 13 repayment plan. Your house and the mortgage on it always has to go through the bankruptcy process, but if the mortgage is bigger than what the house is worth (i.e. you have no equity), then it is likely the bankruptcy Trustee will abandon it. Then you may be able to keep the house, depending on the situation with your mortgage company. If you don't want to keep the house, then doing a chapter 7 bankruptcy is a good way to "walk away" from your house without fear of having to pay a deficiency judgment later. You'll get rid of your personal liability on the mortgage, though the bank will continue to foreclose and will eventually get the house.

You can read all about chapter 7 on the internet. There is a pamphlet at my website which explains the whole process, and that is far to complicated to give in answer to your question.

Great questions. Please understand that filing for bankruptcy is a very complicated process. It is wise to talk to an experienced bankruptcy attorney before deciding to take this important step. Most Arizona bankruptcy attorneys offer a free consultation about the basics of bankruptcy.

It's a liquidation to get rid if unsecured debts but can get you out of secured debts like car payment or house. Your house is not at risk if there is little or no equity. Speak to an attorney before you decide.