United
States Bankruptcy laws are designed to provide relief to
individuals and businesses that are experiencing extreme
financial difficulties.
Chapter 7 refers to straight or liquidation bankruptcy. Under Chapter 7 a debtor
(or husband and wife debtors) files a petition for relief, which automatically
entitles the debtor to a court order protecting the debtor from the people of
businesses to whom he owes money, who are called creditors. With the petition
the debtor must list all property and all debts. Once the petition has been filed
a trustee is appointed by the Bankruptcy Court to supervise the Bankruptcy, and
the individual who is filing can no longer control his property until the case
is closed or the property is released by the Court. A court appointed trustee
has the right to ask any questions about the debtors property and debts. The
trustee can sell, mortgage, rent or dispose of the debtors property. The debtor
may be able to keep some of his property.
The debtor must come to a meeting where the trustee and creditors can ask questions
of the debtor. Most bankruptcy cases can be finished within 3 months or so, but
some can last for years if the debtor has a great deal of property.
At the end of a case, the debtor will ordinarily receive a discharge order. This
order formally discharges or erases many debts, except certain types of debt
such as alimony, support, recent taxes, student loans or debts obtained by fraud
and some others. If a debt is discharged, the debtor will not be required to
pay it, although it can be repaid voluntarily. A discharge does not ordinarily
affect mortgages on real estate or car loans and some other liens. Often court
judgments and certain other liens can be erased.
Filing for Bankruptcy relief does damage credit ratings; it can be reported by
credit bureaus for 10
years. Although credit may be difficult to obtain after Bankruptcy, there is
no law prohibiting a person
who files Bankruptcy from getting credit.
While individuals can represent themselves, it can be complicated. There are
exceptions to much
of what is set forth here. Anyone considering Bankruptcy is urged to consult
a lawyer.