What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a type of bankruptcy case that individuals, married couples, and businesses can file. It is the most common type of bankruptcy, and provides the fastest debt relief.
What is the Process of a Typical Chapter 7 Bankruptcy Case?
Every Chapter 7 bankruptcy filer goes through the following process:
The filer (or "debtor") files the case and the automatic stay goes into effect;
The 341 meeting takes place about 20-40 days later;
The filer completes the post-filing financial management counseling course;
The Court enters a discharge approximately 60-90 days after the 341 meeting; and
The case is closed by the Court (only after trustee's work on the case is completed).
Why is a Chapter 7 Bankruptcy called a Liquidation Bankruptcy?
Because a Chapter 7 bankruptcy gives the filer lasting debt relief in the form of a discharge, which can be granted as quickly as 3 months after filing their case in the bankruptcy court. To facilitate this discharge, the filer gives up those possessions that are NOT protected by an exemption.
The trustee for the case takes those so-called non-exempt assets and sells them, using the proceeds to pay the debtor's creditors. More than 95% of Chapter 7 cases are no-asset cases that do not result in a payout to creditors.
What is Exempt Property?
Exempt property is property the debtor can keep, even after filing Chapter 7 bankruptcy. If all of your property is exempt, you can keep it all! Each state has its own set of exemptions [Link to CO Exemptions]. In addition to the state exemptions, the federal Bankruptcy Code contains the federal bankruptcy exemptions.
How Can You Keep Non-Exempt Property?
You may be able to buy back the non-exempt property directly from the trustee, depending on the non-exempt property you want to keep. However, bankruptcy trustees have an obligation to the creditors to get the most amount of money for non-exempt property, so you may end up in a bidding war against others who want to purchase the property. It may be a better option to consider a Chapter 13 bankruptcy [Link to: What is a Chapter 13 Bankruptcy]. A Chapter 13 bankruptcy allows filers to keep their non-exempt property so long as their unsecured creditors are paid for it through a repayment plan.
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If you are ready to learn more about how bankruptcy could help you relieve your debt, call our office at 719-633-4541 to book your free initial consultation, or click the link to book online.