Answering Your Questions About Chapter 7

There are many questions that you may have about the Chapter 7 bankruptcy process, as it is the most frequently filed form of individual bankruptcy. Although it is best to consult an experienced bankruptcy attorney to get accurate answers to your questions, here are some general answers to the most frequently asked questions about Chapter 7.

How Is Chapter 7 Different Than Chapter 13?

The main difference is, unlike Chapter 13 bankruptcy, Chapter 7 does not require you to file a plan providing for the repayment of your debts. Instead, the bankruptcy trustee will gather and sell your assets that are not exempt by law and apply the proceeds toward your debts. This is why Chapter 7 is also called liquidation.

Does This Mean That I Will Lose All My Property?

Not at all. Under Ohio law, many of your important assets are wholly or partially protected from being sold in the liquidation sale. These assets include:

  • The equity in your residence
  • Furniture
  • Jewelry
  • Motor vehicles
  • Wages, pensions and retirement benefits
  • Tools and equipment used in your trade, occupation or business

Due to the exemptions, many people lose little or nothing during the Chapter 7 process, as most people who file it have few or no nonexempt assets.

Will I Have To Go To Court?

Many people fear filing bankruptcy because they think they will have to go to court and face a grilling cross-examination about their debts. However, this is not the case. In the majority of cases, the closest you will get to a courtroom is the meeting of the creditors (also called a 341 meeting). This meeting is consultative and civil in tone, rather than an adversarial trial. During the meeting, you simply answer the bankruptcy trustee's questions about your debts as well as the questions of any creditors in attendance (however, most do not bother showing up). Your lawyer will be present to help you out if any complications arise during the meeting.

Which Debts Cannot Be Discharged In Chapter 7?

Chapter 7 is effective at eliminating most of your unsecured debts such as medical bills and credit cards. However, the Chapter 7 discharge will not eliminate certain debts such as:

  • Debts for alimony or child support
  • Certain taxes
  • Student loans (except in extreme cases)
  • Personal injury debts incurred due to driving while intoxicated
  • Debts obtained by fraud
  • Court fines and penalties

Any debts that are not discharged during Chapter 7 remain your responsibility to pay once bankruptcy has been completed.

What Happens To Your Credit During Chapter 7?

Like all forms of bankruptcy, filing Chapter 7 will cause your credit score to drop significantly. However, this effect is temporary. If you spend within your means and use credit wisely once you have completed the Chapter 7 process, your credit score will increase incrementally each month. With responsible spending, many people see their credit scores return to or exceed pre-bankruptcy levels in as little as one year.

Is Chapter 7 Right For Me?

The answer to this simple question is rather complex and depends on your personal situation. Steven J. Heimberger Attorney at Law can examine your individual circumstances to help determine the best solution to your debt issues. Call his office in Akron at 234-206-3958 or email him to set up a free initial consultation.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.