A Chapter 7 bankruptcy is used to eliminate, extinguish and wipe out personal liability for debts. Chapter 7 cases are used by individuals or businesses.

Upon filing a Chapter 7 case, the automatic stay goes into effect stopping all collection activity including but not limited to:

• Repossessions
• Mortgage foreclosures
• Garnishments
• Wage assignments
• Lawsuits
• Evictions
• IRS actions
• Harassing phone calls
• Collection notices
• Wage Garnishments

Types of debt that CAN be eliminated:

• Credit card debts
• Medical bills
• Utility bills
• Personal loans
• Certain taxes
• Payday loans
• Automobile title loans
• Bank debts
• Lawsuits and judgments

Types of debt that CANNOT be eliminated:

• Spousal support/maintenance
• Child support
• Criminal restitution
• Certain taxes
• Student loans
• Debts incurred through fraud or other bad acts, such as conversion, embezzlement, false financial statements and willful and malicious injury to property

Many people are afraid to file a Chapter 7 because they fear the loss of their property. However, very few people actually lose their real or personal property. Such assets are only sold when their value exceeds the secured debt and exemptions. For the majority of Chapter 7 cases this is rare.

In most Chapter 7 cases, Debtors are able to keep their houses and cars – as long as they are current and can afford to make the monthly payments. Secured creditors - those holding mortgage liens or security interests in homes, cars, furniture or other collateral - are treated differently than unsecured creditors when the property securing a creditor's debt is kept during the Chapter 7. Generally, to retain the collateral of a secured creditor the debt must be current and the debt reaffirmed in the Chapter 7. Reaffirmation of a secured debt reestablishes the Debtor's personal liability for that debt and that debt is not discharged. Property may also be redeemed or surrendered to secured creditors.

Chapter 7 cases are filed for very specific reasons, such as:

• There is dischargeable debt and no ability to repay
• A car loan or home mortgage is in default or foreclosure and the owner is unable to pay the current payments and a deficiency will exist after the collateral is sold
• To get a fresh start

Chapter 7 cases usually take about 120 days from start to finish. After the case is filed, Debtors are required to attend a meeting of creditors with their attorney within 30 days. At this meeting, the Debtor will answer questions from the Chapter 7 Trustee about the information contained in the Debtor’s bankruptcy documents. After the meeting of creditors, a Discharge Order is issued within approximately 70 days.