Chapter 7 Bankruptcy

Chapter 7 can be filed as an individual with “consumer Chapter 7 bankruptcy” or as “business Chapter 7 bankruptcy”, and tends to last 3-6 months. In Chapter 7 bankruptcy, some property may be liquidated to pay off debts, but often much of the property will be exempt, especially items such as clothing, cars, household furnishings, etc. A benefit of this type of bankruptcy is that most or all unsecured debt is erased,often including instances of credit card or medical debt. It is important to point out that not all types of debtcan be erased, such as child and spouse support or most types of tax debt. If money is owed on a secured debt, such as a car loan where the car is pledged as a guarantee of payment, several options exist. The creditor can repossess the property, payments can continue under the original contract, or a lump sum canbe paid to the creditor equal to the current replacement value of the property. In some cases, the secured debt can even be eliminated under the bankruptcy.


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