Chapter 7 Bankruptcy

Chapter 7 “fresh start” bankruptcy

Chapter 7 is the most frequently used type of bankruptcy, and it applies mainly to consumers – though it can be used in many situations involving businesses.  This chapter of the U.S. Bankruptcy Code allows a debtor to liquidate and start over again, thus the “fresh start” moniker.  Liquidation sounds drastic.  However, in many cases the debtor can utilize exemptions that are available under federal and / or state law to protect most, if not all, of the debtor’s assets from liquidation.  Exemptions can help a person in bankruptcy protect a house or a car.  They can generally help to protect all or most of the household goods you have.  These valuable exemptions can even help people protect valuable property that you need to work in your profession, called “tools of the trade.” The end result is that someone in Chapter 7 bankruptcy can generally keep their property, clear away their debts, and start over again.


What Chapter 7 cannot do….

While this sounds good on the surface, there are many limitations to the relief that Chapter 7 can provide.  It cannot help you save your house if you have more equity in it than what the exemption will allow.  It cannot generally save all of your vehicles, boats, motorcycles, and RVs if you have several of them.  It does not provide much help to catch up on the past-due payments on secured assets that you want to keep.  Chapter 7 also does not help you protect valuable collections or other property that does not fall under and exemption.  If a valuable family heirloom is not covered under an exemption, then you are in jeopardy of it being sold to pay your creditors.  These circumstances might all be cured by using a Chapter 13 bankruptcy instead.


Qualified Users of Chapter 7

If a person qualifies for Chapter 7, this is the quickest and lowest cost bankruptcy type there is.  It generally takes about 100 days to get to discharge of your debts after filing the bankruptcy petition.  The court currently imposes a cost of $335 for this type of bankruptcy.  An attorney will charge you an amount in addition to these costs if you have wisely chosen to use one.  Whatever the attorney fees are, they will be significantly less than they would be under any other chapter of bankruptcy.  Chapter 7 bankruptcy can only be used once every 8 years, so wise debtors will use this type of bankruptcy only when it is necessary and after having weighed any other available option.  A Everett bankruptcy attorney will help you with this analysis, so seek one out.