What is Chapter 7 and how does it work?
Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. The Bankruptcy Code is that part of the federal laws that deal with bankruptcy. A person who files under Chapter 7 is called a debtor. In a Chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. In return, the debtor receives a Chapter 7 discharge, and obeys the orders and rules of the court.
What is a Chapter 7 Discharge?
It is a court order releasing a debtor from all of his/her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay. Some debts, however, are not dischargeable under Chapter 7 and some persons are not eligible for a Chapter 7 discharge.
Which Debts Are NOT Dischargeable Under Chapter 7?
- Most tax debts and debts that were incurred to pay federal taxes owed.
- Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement, if the creditor files a complaint in the case (included here are debts for luxury goods or services and debts for cash advances made within 60 days before the case is filed).
- Debts not listed on the debtor's Chapter 7 forms, unless the creditor knew of the case in time to file a claim.
- Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the case.
- Debts for alimony, maintenance, or support, and, if the creditor files a complaint in the case, certain other divorce-related debts including property settlement debts.
- Debts for intentional or malicious injury to the person or property of another, if the creditor files a complaint in the case.
- Debts for certain fines or penalties.
- Debts for educational benefits and student loans that became due within the last seven years, unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his or her dependents.
- Debts for personal injury or death caused by the debtor's operation of a motor vehicle while intoxicated.
- Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.
What Persons Are Not Eligible For A Chapter 7 Discharge?
- A person who has been granted a discharge in a Chapter 7 case filed within the last six years.
- A person who has been granted a discharge in a Chapter 13 case filed within the last six years, unless 70% or more of the unsecured claims were paid off in the Chapter 13 case.
- A person who files a waiver of discharge that is approved by the court in the Chapter 7 case.
- A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 case.
- A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.
- A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.
- A person who fails to satisfactorily explain any loss or deficiency of his or her assets.
- A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case, or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.
What Persons Are Eligible To File Under Chapter 7?
Any person who resides in, does business in, or has property in the United States may file under Chapter 7, except a person who has been involved in another bankruptcy case that was dismissed within the last 180 days on certain grounds.