The primary purpose of bankruptcy under Chapter 7 is to help you keep as much of your exempt property as possible while discharging as many of your debts as possible.
A discharge means that you are no longer liable for that debt. Once a debt has been discharged, a creditor cannot take any collection actions against you. While the majority of debts in a Chapter 7 bankruptcy case are discharged, there are some debts that cannot be discharged. You should consult a qualified bankruptcy attorney to ensure you understand what can be and what cannot be discharged in a Chapter 7 bankruptcy case prior to filing.
According to the Bankruptcy Code, the court may deny a discharge under Chapter 7 if:
“. . . it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management.” (11 U.S.C. § 727; Fed. R. Bankr. P. 4005)
If you have equity in your home, there are possible exemptions and protections that your attorney may be able to utilize to help you keep your home. If there is no equity in your house, the court-appointed trustee will typically “abandon” your house to you. For this to happen, you must continue to make a “good faith effort” to make your mortgage payments. Contact a qualified bankruptcy attorney today to find out what options exist for you.
If you have an outstanding loan on your automobile, it is considered a secured debt. In this case, a creditor may be able to repossess your vehicle. If you wish to retain the possession of your car, you may be able to “reaffirm” the debt. A reaffirmation of debt means that, in exchange for protection against repossession, you agree to remain liable for your debt (even if it would otherwise be discharged under a Chapter 7 bankruptcy), and promise to pay the remaining balance owed. There are timelines dictating when you are allowed to “reaffirm” a debt during the bankruptcy process. To find out more about a “reaffirmation of debt”, speak to a qualified bankruptcy attorney today.
If all of your assets are either exempt or subject to valid liens, your bankruptcy case will be considered one involving “no assets.” In a “no asset” case, there is no distribution to unsecured creditors as there is no property to liquidate.