Chapter 7

Chapter 7 is the most common form of bankruptcy. It is a liquidation proceeding in which the debtor's non-exempt property is sold by the Chapter 7 trustee and the proceeds are distributed to creditors.  Certain property is exempt, such as a vehicle of up to $2,500, real estate of primary residence of up to $20,000 for an individual or $40,000 for husband and wife, retirement benefits and various types of household goods.

“In a Chapter 7, you are saying to creditors, I may have a job, but my debts are eating up my income so I can’t afford to pay you,” said Robert Cohen.  “In other words, you need to dump the debt.”

In a Chapter 7, usually the largest portion of debt is unsecured debt, such as medical debts, credit card debts, and loans that are not backed by any tangible assets or property. Secured debts (such as house and car loans) are debts backed by property.  A creditor whose debt is secured has a legal right to take your property to satisfy the secured debt.

Chapter 7 bankruptcy brings an automatic stop to car repossessions and home foreclosures.  However, the mortgage company or car creditor may still pursue their rights to take your house or car.  Chapter 7 bankruptcy gives you the critical time you need to eliminate or renegotiate your debts.  It’s wise to keep current on your loan and get insured if you want to preserve your home or vehicle.

Any wages the debtor earns after the case is begun are the debtor's and creditors have no claim on those earnings.  By wiping out most debt, many debtors are able to get back on their feet.  If debtors have significant assets they wish to protect such as houses, Robert Cohen often recommends Chapter 13 bankruptcy.

Fraud may also be an issue in Chapter 7 bankruptcy.  For example, you could face criminal charges for fraud if you have been using credit cards excessively and near to your bankruptcy.
 

For an initial consultation without charge, call Robert I. Cohen at (303) 830-2811

Robert I. Cohen
1888 Sherman St.
Suite 400
Denver, CO 80203-1159
Telephone: (303) 830-2811
Fax: (303) 830-7016
Email