What Is a Chapter 7 Filing? What Restrictions Apply to Chapter 7?
Life has thrown you a curve. Maybe you’ve been hurt in an accident or you’re suffering from a serious illness, making it difficult or impossible for you to work. Maybe the effects of the pandemic have finally hit your employer and you’ve lost your job. Maybe your marriage has fallen apart and you’re facing the prospects of divorce. A personal bankruptcy filing can help you get a fresh start.
Let’s get one thing straight first…contrary to the false statements that often circulate, bankruptcy was never intended as a “get out of jail free” card. The American bankruptcy laws were enacted because legislators knew that hard-working people often encountered unexpected circumstances and needed a way forward.
When you have determined that bankruptcy is your best option, you’ll discover two typical paths—liquidation under Chapter 7 and reorganization under Chapter 13. Let’s look at Chapter 7.
What Is a Chapter 7 Bankruptcy Filing?
In a Chapter 7 filing, debtors are allowed to “discharge” certain debts. That means that the debtor will forever be rid of any legal obligation to repay those debts. In exchange for that opportunity, debtors must relinquish certain assets to the bankruptcy court, to be used to pay off creditors. Here are the important things to understand about bankruptcy protection under Chapter 7:
- You must qualify to discharge your debts by submitting to a “means test,” whereby you provide financial data to help the bankruptcy court determine whether you have the resources to repay your creditors over a specific period of time, generally three to five years
- Some of your debts may either be nondischargeable or extremely difficult to discharge. Child support arrearages cannot be wiped out in bankruptcy. Student loan debt and tax obligations can be hard to discharge.
- You may be able to keep many of your assets. There are state and federal exemptions for property subject to a bankruptcy estate (you must choose one or the other set of exemptions, though).
- Immediately upon filing, you will be protected by the automatic stay in bankruptcy, so that your creditors cannot harass you with phone calls or letters, and cannot take any legal action, other than through the bankruptcy proceeding, to collect a debt
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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