Chapter 7 is one of the bankruptcy laws that can be used to file a petition if the borrower has an excessive amount of debt and has no way to repay it. The law is for individuals wishing to file for bankruptcy. This law allows a trustee to keep some property belonging to the debtor as a security for the payment. Also, the creditors can no longer take necessary action to collect the debt from this individual unless it is relation with the necessary lien. Most popular instances where the debtor files for a Chapter 7 case are medical expenses and credit card debts.
As soon as the debtor files a bankruptcy case, an injunction is passed, after being assigned a case number, to stop the creditors. This is known as automatic stay. After a month, the administrative trustee’s office appoints a trustee to deal with this case. The trustee has to raise as much money as possible by liquidating all the assets belonging to the debtor at that time. This amount will be given to the creditors as per priority. It is the duty of the trustee to keep records about the debtor and report any fraudulent activities. It depends on the trustee’s judgment to decide whether the individual is truly liable or not.
As mentioned, the property that is kept as lien can help in exemption of certain amount. An attorney can determine the value of these assets and also advice on which of the assets will be placed under a trustee so as to make a proper lien amount. The creditors can then file a complaint within 60 days after the trustee meets the individual to decide about the assets. The trustee has to file the objections, by the individual, for any exemptions within 30 days after meeting with the individual. If the creditor has any objections, a trail will follow. An attorney can provide the best advice in such instances where the creditor’s objection resulted in a trail.
Usually, most of the chapter 7 cases are discharged without any objections, but specific debts will not be discharged as easily. An attorney can provide proper guidance regarding the kind of debts that might create problems. Creditors have the option of applying to re-open the case in case they are not satisfied with the discharge.
The new bankruptcy bill passed by President Bush might make some major changes in the Chapter 7 law. This bill narrows the possibility of filing for bankruptcy, as the debtor cannot file under Chapter 7 for all kinds of debts now. The federal court will decide the chapter under which a particular case can be filed as also if a case can be filed under Chapter 7 or not.
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