Chapter 7 bankruptcy is widely known by debtors as a “fresh start.” Sometimes you may also hear it called “straight bankruptcy.” This is because its purpose is to simply wipe out debt. There is no repayment plan or debt negotiation. A debtor is no longer liable for any remaining balance on most debts once a Chapter 7 discharge has been issued by a bankruptcy court. However, there are still a few exceptions to the rule.
Just because a person files Chapter 7 bankruptcy, it does not mean he or she are required to surrender all vehicles, or move out of their home. When the bankruptcy is filed, if payments on those particular debts are current, the creditor may choose to offer the debtor what is known as a Reaffirmation Agreement. Signing this agreement means that a debtor is choosing to continue paying those debts as if nothing ever happened, and will remain in possession of those assets. The downfall to this is that should the payments fall behind in the future, and the creditor chooses to repossess or foreclose, the debtor will still be liable for any remaining balance. No part of the debt will be discharged within the Chapter 7 bankruptcy. For this reason, it is of utmost importance that if a person signs a Reaffirmation Agreement, there be no doubt at all that the debt will be paid on time, and in-full.
In addition to reaffirmed debts, there are also certain debts that are not eligible for discharge within any Chapter of bankruptcy. They include certain tax liabilities, student loans, child support obligations, and criminal fines.
Chapter 7 bankruptcy is a relatively easy process when handled by an experienced attorney. Simply put, and assuming no issues arise, the process is to file a petition, attend court one time for a Meeting of Creditors, then wait on the court to issue a discharge. From start to finish, a simple case is completed in three to four months.