What is a Chapter 7 bankruptcy?
Chapter 7 is the liquidation chapter of the Bankruptcy Code. Chapter 7 cases are commonly referred to as straight bankruptcy or liquidation cases, and may be filed by an individual, corporation, or a partnership. Under Chapter 7, a trustee is appointed to collect and sell all property that is not exempt and to use any proceeds to pay creditors. In the case of an individual, the debtor is allowed to claim certain property exempt. In exchange for this, the debtor gets a discharge, which means that the debtor does not have to pay certain types of debts.
Corporations and partnerships do not receive discharges. Consequently, any individuals legally liable for the partnership`s or corporation`s debts will remain liable. Therefore, individual bankruptcies may be required as well as the corporation or partnership bankruptcy.
If I file for Chapter 7 bankruptcy can I keep some of my property?
In general, Chapter 7 bankruptcy gives up all of your non-exempt property. Exempt property is property defined by state law which is not discharged from bankruptcy. State law varies greatly but usually includes property that is worth less than a specified amount.
Will all of my debts be discharged in a Chapter 7 bankruptcy?
No. It depends upon the type of debt. Though bankruptcy filing does discharge most debts, there are certain debts which will not be removed. These debts which are usually not removed include alimony, child support, and some tax debts. Other debts also may not be discharged if the creditor convinces the court that the debt should not be discharged from bankruptcy.
Can't I just transfer my assets to a friend or a Living Trust before I file for bankruptcy?
These types of transfers may be considered fraudulent and your Chapter 7 trustee may be able recover the property within a year of filing. Factors will be considered such as the timing of the transfer as well as whether it was a gift or given with disproportionate value in return. The rules on fraudulent transfers apply to everyone and not just family members, but the amount of time allowed for the trustee to recover the property may be different depending on who the transfer is made. In a transfer to a trust, the law may vary depending on which state you are in and on the type of trust.
Is There A Limit On The Number Of Times That I Can File For Bankruptcy?
The time periods between bankruptcies depends on the type of the previous filing and the type of new filing. If your new filing is a Chapter 7, you must wait eight (8) years from last filing of a Chapter 7, or six (6) years from last filing of Chapter 13. If your new filing is a Chapter 13, you must wait four (4) years from last filing of Chapter 7 or two (2) years after a discharge of a previous Chapter 13 case.
Will bankruptcy cause me to lose my safe deposit box?
Maybe. You are required to declare all of your assets when filing bankruptcy, including the contents of any safe deposit boxes that you own. If you are filing Chapter 7 bankruptcy, for example, all of your assets beyond certain exempt amounts may be liquidated; in this situation, you could lose your safe deposit box. Additionally, if you fail to disclose the safe deposit box and/or its contents in your bankruptcy filings, your bankruptcy could be subject to dismissal for attempting to hide assets.
Additional Chapter 7 Bankruptcy Articles
- What are the Basics of a Chapter 7 Bankruptcy?
- Will Filing for Chapter 7 Bankruptcy Get Rid of All My Debts?
- Chapter 7 Bankruptcy Exemptions
- Chapter 7 Bankruptcy Rules