Chapter 7

Chapter 7 is the quickest and usually the cheapest bankruptcy available.  If you or your business qualify for a chapter 7 bankruptcy, you may be able to eliminate all your credit cards and medical bills in just 3 months.  The main issue is whether you qualify based on income and potential assets.  If your income is too high under the guidelines or if you have have too many assets, you may not qualify for a chapter 7.  But no worries, chapter 13 or chapter 11 may be a better suited for your depending on your circumstances.

In a Chapter 7 case, the Bankruptcy Court appoints a trustee to examine your assets and determine if there are any assets not protected by available “exemptions”.  Exemptions are laws that allow you to keep some or all of your assets away from creditors.  For example, exemption laws allow an individual to protect a certain amount of equity in a home, car, household goods, bank accounts, retirement plans, and certain other types of personal property. If there are any assets that cannot be fully exempted, it is the Trustee’s job to sell it and to distribute the proceeds among creditors. But do not be alarmed, in reality most people who file for chapter 7 under the guidance of experienced counsel can exempt and keep everything they have and the trustee rarely liquidates any assets.

A chapter 7 is usually best suited to deal with credit cards, medical bills, and money judgments.  However, certain types of unsecured debts cannot be eliminated through a chapter 7.  These include student loans, alimony, child support, criminal fines, and some taxes.  Finally, a chapter 7 is usually not a good option if you are behind on your mortgage payments, car payments, or if you are looking to eliminate a second mortgage on your home.  A chapter 13 may be a better option under those circumstances.

Bankruptcy offers many options and chapters to give you a fresh start depending on your circumstances.  The key is to structure the best possible bankruptcy under guidance of experienced legal counsel.