What Is A Chapter Seven Bankruptcy

When a consumer files for bankruptcy, they are said to have ‘discharged’ their debt. This simply means that any debts, or owed money, are erased from their record. Their credit is cleared and they no longer owe monies to their debtors. While this simple explanation of the term ‘discharge’ is easy to understand, the actual process is far more complicated. In reality, not all debts can be discharged. The determination is made, in part, by the type of filing – Chapter 7, 11 or 13. Other considerations including the kind of debts owed, the identity of the filer and their past criminal history. At the end of the day, even if a consumer files for Chapter 7, they may be left with some debt.

In order to qualify for a discharge under Chapter 7, the applicant must meet several key criteria.

You can only apply to discharge your debt once every nine years.

In accordance with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, any one applying for and receiving a bankruptcy discharge must participate in a money management class.

You must not have a past that includes dishonest filings, poor record keeping, ignoring of court orders or fraudulent transfers. Any of these incidents will make it likely for the court to refuse your request for discharge.

  • Once your discharge is granted, you will be offered protection in several forms.
  • Legal action regarding your debts and their collection must cease.
  • Your debtors must stop contacting your via mail, phone or other form for each debt that was covered by the discharge.

There are several things that a discharge does not do. First, the debt does not disappear after the discharge. While the company to which the debt is owed must cease collection activities against you, that protection is not offered to anyone who has co-signed or guaranteed the loan. The company to whom the money is owed can go after them to recover the debt.

Bankruptcy discharges do not cover liens, so it is important to keep in mind any outstanding liens. For example: if a debtor had used a car valued at $3000.00 to secure a loan in the amount of $7000.00 but left the loan unpaid, they can include the $7000.00 in their request for a discharge. While the discharge may be granted, the ‘security’ used by the debtor, the car, is not protected and can in fact, be repossessed. In this case, the debtor is only protected for the difference between the original loan and the security or $4000.00. To make the process easier, you can hire 

San diego bankruptcy attorney

It is also important to remember that a discharge can be revoked. There are several causes for revocation, generally involving dishonest behavior by the debtor. The court will reverse a discharge decision for several reasons.