Chapter 7
Posted on 12. Mar, 2009 by emmettjones in Bankruptcy
Chapter 7 is typically known as the “liquidation” bankruptcy. The liquidation refers to the liquidation of unprotected assets in order to pay off a debtor’s debts (NOTE: depending on the assets you have, you may not lose any of your assets with a Chapter 7 filing. Schedule a consultation with an attorney to discuss your particular situation). In a Chapter 7, debtors are usually not required to pay back any portion of the unsecured debt which they owe, barring special circumstances such as an extremely high amount of equity in their property, or a violation of the bankruptcy code, preventing the debtor’s discharge. Under the current bankruptcy provisions, debtors are able to file for and receive a Chapter 7 discharge every eight years.
The chapter 7 process is approximately 6 months long, and during that time the debtor(s) is not required to pay back any portion of their unsecured debt (assuming that the debtor has not violated the bankrutpcy code and is completing the case properly). Debtors are usually able to keep their homes and vehicles, assuming they can stay current on the payments before and during the bankruptcy, and that they do not have an overabundance of equity in the property.
Chapter 7, your credit score, and credit report
A Chapter 7 discharge stays on a debtor’s credit report for somewhere between six to ten years. Which means that if you received a discharge today, and checked your credit report 7 years from now, the fact that you filed a bankruptcy would still be shown on the report. The more important issue though, seems to be those matters related to a debtors credit score and the ability to obtain credit after bankruptcy. Obviously, when a bankruptcy is filed, the debtor’s credit score is going to drop dramatically, but it does not necessarily preclude the debtor from obtaining credit in the future. Part of a lenders’ determination of credit-worthiness is an examination of the borrowers current debt. In normal Chapter 7 cases a borrowers unsecured debts are completely discharged, making their ability to obtain after-bankruptcy credit a very realisitic goal.
