The primary purpose of a Chapter 7 bankruptcy filing is for the debtor to get a fresh start by discharging debts they cannot afford to repay. When a Chapter 7 case is filed, the debtor lists all of their debts in the bankruptcy schedules that are filed with the court. The court clerk uses the addresses provided to mail notice to the creditors, which stops them from bothering or harassing the debtor during the case. The case takes about four months to complete.
When the case is successfully completed, the debtor receives a discharge which removes their obligation for the listed debts. The only debts that are not discharged are those that are reaffirmed (such as car loans for vehicles the debtor wants to retain), and those that are listed in the bankruptcy code as non-dischargeable debts. Examples of non-dischargeable debts include alimony, child support, recent tax obligations, and student loans. There are other debts that may not be discharged as well, which is part of what the debtor will discuss with their attorney prior to filing the case. It is important to make sure that the debts you are trying to get rid of can be removed with a bankruptcy discharge.
A secured debt can be discharged, but the debtor often must surrender the security if the debt is discharged unless it is secured by real property (such as a house or condominium). With real property, even though the debt is discharged, the debtor can retain the property if they continue to make payments and keep the loan current pursuant to the contract. With car loans or other personal property, a debtor must reaffirm the debt (which leaves them obligated on the loan) or run the risk of repossession even if they continue to make the payments.
When unsecured debts are discharged (credit cards, medical bills), they are no longer the debtor’s obligation, and the creditor cannot call, send letters, or attempt to collect in any way. That is the primary benefit of a Chapter 7 bankruptcy filing.
It is important to speak with an attorney before filing bankruptcy to make sure the discharge is maximized and removes the debt the debtor is trying to avoid.
For more information or a consultation, please call 661-210-5657, or e-mail mjf4bk@ca.rr.com.