"If you have a garden and a library, you have everything you need." - Cicero

Chapter 7 Bankruptcy in Simple Conditions

Chapter 7 Bankruptcy is the most common type of bankruptcy filed by ordinary consumers. The object of Chapter 7 submission is to obtain the release of all your unsecured debt, such as credit cards, and even most of the valuations. A “repatriation” court only means that you don’t have to pay these debts. Sounds good, right? So, how to file chapter 7 bankruptcy? Chapter 7 is a very powerful tool, giving a fresh start, free of debt, but not for everyone. To be eligible for Chapter 7 bankruptcy, the debtor must be able to show that he really cannot afford to pay part of his debt after the required living expenses. After all the necessary living expenses, such as payment of rent or mortgage, food, clothing, utilities, car payments, gasoline, insurance, and the like, there is no possible income left to pay even one hundred dollars or more against credit cards and other unsecured debt.


In addition, Chapter 7 bankruptcy also requires that if the debtor has a valuable asset that is not included in the permissible exceptions, then the asset must be submitted for liquidation (sale) to pay something to one’s creditor. The state differs in the number of exceptions or the value of assets that might be saved in Chapter 7. California, for example, states that couples who are married under the age of 65 can own a home with no more than $ 75,000 of equity, and one person under 65 may retain houses with equity of no more than $ 50,000. Other exemption amounts exist to cover vehicles of relatively low value, household furniture, equipment, and other personal assets. The most protected asset in any state is an eligible pension account. A 401 (k) or IRA, for example, is completely released or protected in most circumstances.

In short, Chapter 7 bankruptcy gives the debtor a second chance to be freed from almost all unsecured debt, but to obtain such a profit, he cannot produce enough to pay anything against such debt. And, if the debtor has a valuable asset that exceeds the small amount allowed to be saved, then the asset will be taken and sold to pay something against the debt.

If the debtor gets enough to pay for his unsecured debt, the debtor will not qualify for Chapter 7 disbursement. Likewise, if the debtor has valuable assets and does not want to take the risk they are taken from him, then Chapter 7 is not a good choice for debtors that. In one of these cases, the debtor must consider bankruptcy in Chapter 13, where the debtor is expected to pay what he can pay after the required living expenses toward unsecured debt for a period of 3 or 5 years. However, under Chapter 13, the debtor can keep all of his assets. Nothing is taken from the debtor Chapter 13.

In considering whether to file Chapter 7 bankruptcy or Chapter 13 bankruptcy, one should always consult with a competent Bankruptcy Attorney.