Chapter 7 Success Lawyers Chicago - Chapter 7 Bankruptcy Defined

Chapter 7 Bankruptcy Process

Chapter 7 Bankruptcy is commonly referred to as “fresh Start” bankruptcy. It is a form of relief for an honest debtor to eliminate most or all of his debt.
A Chapter 7 Bankruptcy case starts with the filing of a bankruptcy petition. The petition lists all of the assets and liabilities of the debtor. It also contains detailed information concerning the income and expense budget of the debtor. In the overwhelming majority of Chapter 7 bankruptcy cases that are filed, there are no assets to be administered. Essentially, the debtor receives a fresh start except for a few non-dischargeable debts.
Non-dischargeable debts include student loans, recent taxes, parking tickets, child support, maintenance, alimony and debts incurred through fraud.
What is eliminated are unsecured debts such as credit card balances, medical bills, utility bills, personal loans, auto deficiencies and payday loans.

Secured debts such as homes and vehicles can also be eliminated provided the debtor is willing to surrender the secured items.

The fresh start available through Chapter 7 does not come without a price. First, the Chapter 7 debtor must submit to two credit counseling/financial management sessions. Second, the Chapter 7 debtor must provide extensive documentation such as sixty (60) days worth of pay advices prior to filing and submission of his most recent federal tax return. Lastly, there is a knock on the debtor’s credit so that credit in the immediate future will be difficult and/or costly.
However, in my experience of handling Chapter 7 bankruptcy cases since 1991, the overwhelming majority of clients received a new financial life, far outweighing any negative impact on their credit ratings. One must eliminate his debt and start over before he can expect to rebuild his credit score and credit worthiness.

Back to Articles