All about Chapter 7 Bankruptcy Laws

Info_lover | Jun 17, 2010 |

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Chapter 7 is one of those bankruptcy laws which can be used to file for a petition if the debtor has an overwhelming amount of debt and has no way of repaying it. The Chapter 7 bankruptcy law caters specifically for individuals who wish to file for bankruptcy. Chapter 7 bankruptcy laws permit a trustee to keep some assets belonging to the debtor as a form of security collateral for the payment. In addition, the creditors can no longer take any legal action to collect the debt from this individual unless it is related to some necessary lien. Very often, debtors file for Chapter 7 bankruptcy due to reasons such as excessive credit card debts and medical expenses.

Once the debtor files a bankruptcy case, an injunction will be passed to stop the creditors from harassing the individual. This is called an automatic stay. After around one month, the administrative trustee's office will appoint a trustee to deal with this case. The trustee must raise as much money as possible by liquidating all the assets belonging to the debtor at that point in time. This amount will be given to the creditors on a case-by-case basis. The trustee has the duty of keeping records about the debtor and reporting any fraudulent activities. It will depend on the trustee's judgment to decide whether the individual is truly liable or not.

As mentioned above, the assets which are kept as lien can be used to exempt the debtor from paying certain amounts. A bankruptcy attorney will help to determine the value of these assets and provide advice on which of the assets can be placed under a trustee in order to make a proper lien amount. The creditors can then file a complaint within 30 days after the trustee has met up with the individual to reach a decision about the assets. The trustee has to file the objections, by the individual, for any exemptions within 1 month after meeting the debtor. If the creditors have any objections, a trial will then be conducted. An attorney can provide the best advice in such cases whereby the creditor's objection has resulted in a summary trial.

Very often, most of the chapter 7 bankruptcy cases are discharged without any objections from the creditors, but specific debts may not be discharged as easily. An attorney can give proper guidance with regards to the kind of debts which can potentially create problems. Creditors will have the option of applying to re-open the case if they aren't satisfied with the discharge.

The new bankruptcy bill, passed by President Bush a few years ago, might cause some major changes to the bankruptcy laws for Chapter 7. The new chapter 7 bankruptcy laws narrow the possibility of filing for bankruptcy, as debtors can no longer file bankruptcy under Chapter 7 for all types of debts. The federal authorities will decide the chapter under which a particular case can be filed.