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Overview of Chapter 7 Bankruptcy

Chapter 7 cases result in the immediate end of any legal proceedings against you to take money or other kinds of property, including your home, away from you. A trustee is appointed from a panel of trustees. The trustee’s job is to read the petition and schedules and ask the debtor questions under oath about property, debts, and other financial issues. This usually occurs at a court house or in some other governmental office. The debtor must attend this important meeting.

TIP: Persons without a regular income will generally be required to file under Chapter 7 because a repayment plan under Chapter 13 would be impossible.

Chapter 7 bankruptcies do not include a repayment plan that the debtor must adhere to for many months. Once the assets are liquidated, the bankruptcy is granted, the debts are discharged, and the proceedings are finished. A typical Chapter 7 case takes approximately 6 months from start to finish.

The trustee has a duty to sell the debtor’s nonexempt property and to pay creditors in a specific order of priority required in the Bankruptcy Code.

Since exempt property may vary from state to state, the debtor or person preparing the bankruptcy petition and schedules must know what law applies in order to preserve the most property for the person desiring a fresh start in life. ‘Exempt property’ is property a debtor gets to keep to help get a fresh start in life. Under the Bankruptcy Code, each state has the right to opt out of the generous federal exemptions and to add their own. The State of Florida has elected to opt out of the federal exemptions and enacted its own.  

The filing of any voluntary bankruptcy petition results in the automatic stay being imposed. Creditors are prohibited by federal law from taking any action to collect money or take property such as cars or homes away from the debtor. They must ask the bankruptcy judge for permission to resume any action except in very limited circumstances. They must prove their legal right to do so.

A Chapter 7 debtor receives a discharge of all debts except for those which are not typically discharged under the Bankruptcy Code. The discharge is mailed to the debtor 60 days after the debtor meets with the trustee.

More: See Frequently Asked Questions About Bankruptcy

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