CHAPTER 7
What is it?
Chapter 7 bankruptcy, commonly known as “liquidation,” is normally the simplest and quickest form of bankruptcy. Chapter 7 bankruptcy may eliminate most kinds of debt, called “unsecured” debt, that is not backed by an interest in your property, such as your car loan, or mortgage. Some of those “unsecured” debts may be credit card bills, many personal loans, and medical bills. Chapter 7 immediately stops most creditors upon filing your petition through the Automatic Stay, a court order that halts all collection activity, including lawsuits and garnishments.
What can I keep?
Don’t be fooled by the name “Liquidation,” gone are the days where bankruptcy meant taking everything you own and selling it all off. There's no such thing as debtors' prison and you won't be left in your underwear on the court steps. California has laws that exempt some of the value in your property from being liquidated to pay your creditors. Depending on your case, you may be able to keep your car and home if you are current on your payments and don’t have much equity.
How long does it take?
Generally, the time for a Chapter 7 takes around 4-5 months from start to finish. When the Bankruptcy Petition is filed, the Automatic Stay begins, halting all collection activities, wage garnishments, and harassment by your creditors. The court will give notice of the bankruptcy to your creditors and set a time for the Meeting of Creditors about 30 days after the filing. Your attendance at the Meeting of Creditors is required. The Meeting of Creditors is overseen by the trustee (who represents all of your creditors' interests) appointed to your case and gives the creditors an opportunity to inquire about the debts. Within 45 days of the Meeting of Creditors, a mandatory Financial Management Course must be taken, or the case will be closed without a discharge of debt. If after looking over the case the Trustee determines there are no assets to distribute, they will file a Report of No Distribution. If there are no objections to dischargeability before the deadline, the court will issue an order of discharge and final decree.
What is a discharge?
The discharge is a court order given at the end of a bankruptcy that requires all of your creditors that were named in the bankruptcy to stop any action to collect upon those debts. The Supreme Court has stated that the purpose of bankruptcy is to give people the ability to “reorder their affairs, make peace with their creditors, and enjoy a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” The discharge is how this is done. Once you have gotten a discharge, you are free of those debts.
What happens afterwards?
The next step is to assure that you are truly getting your fresh start. We will meet 30 days after your discharge to review your credit report and assure that your creditors are accurately reporting the correct information. We are focussed on your financial health and protecting your rights as a consumer, and that does not end with the discharge. If your creditors continue reporting that you owe any of the obligations discharged in bankruptcy to the credit reporting agencies, we will assist you in taking them to court.
If your creditors continue actions to collect any of the obligations discharged in bankruptcy, we can haul them back into the bankruptcy court to protect your hard won discharge.