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Chapter 7 Can Help You Start Over

Chapter 7, the most common type of bankruptcy, can give the debtor a “fresh start” by ending the debtor’s personal liability on debts. As a general rule, individual debtors receive a discharge in most Chapter 7 cases. The typical Chapter 7 case takes about 90 days.

Not all individuals can file under Chapter 7. Business entities do not receive a discharge in Chapter 7. A thorough financial examination is necessary to determine if someone is eligible. Chapter 13 bankruptcy might be an appropriate option for those who do not qualify for Chapter 7.

How To File For Chapter 7 Bankruptcy

To begin, the debtor files a petition in the district where the individual resides or where the main business office or business assets are. A husband and wife may file together or there may be reasons for one spouse to file individually.

Filing the petition creates an “automatic stay,” which stops most creditor actions, such as a lawsuit, against the debtor and the debtor’s property. In addition, the court will appoint a trustee to manage the process.

What Happens To Property And Debts

In most individual Chapter 7 cases, the debtor will keep some of their assets by claiming “exemptions.” Federal or state bankruptcy law determines exemptions. California is among the most favorable states in terms of offering exemptions.

30 days after filing, the bankruptcy trustee will hold a creditor meeting. At this meeting, the trustee questions the debtor to verify the information in the debtor’s bankruptcy papers and to identify assets which may not be exempt.

The trustee can sell nonexempt assets and then distribute the proceeds to creditors according to priority (i.e., past-due child support is paid before general unsecured creditors). Secured creditors normally retain the right to seize their collateral after the court grants discharge, which can influence which assets the debtor seeks to keep.

Finally, the court clerk normally issues a discharge notice. A copy of the discharge is mailed to the debtor and the creditors listed in the bankruptcy papers. Most individual Chapter 7 cases end with a discharge of debts.

However, some types of debts are not dischargeable. Remaining financial obligations could include alimony, child support, taxes, student loans and more. Bankruptcy also does not extinguish property liens.

Creditors Can Dispute Discharge Of Debt

A creditor has two options to oppose the discharge.

  1. File a complaint objecting to the discharge of any of the debtor’s debts
  2. File a complaint to determine if the creditor’s claim is an exception to the discharge

A creditor may pursue one or both of these remedies by filing a complaint with the bankruptcy court. However, the grounds for objecting to the Chapter 7 discharge are narrow, and the creditor or trustee has the burden of proving the case.

Get Detailed Answers And Advice

The bankruptcy process is highly complex. Protect your financial interests now and in the future by working with a qualified lawyer at the Law Office of Thomas B. Gorrill. Call 619-237-8889 or email us for a consultation.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.