What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is by far the most well know bankruptcy out of all the other chapters. It’s referred to as “liquidation” bankruptcy since it cancels your debts, but you may have to allow the bankruptcy court to sell some of your possessions for payment to your creditors. You may also be required to sell additional (“nonexempt”) property to help pay off your debts. Most people don’t have nonexempt property. But if you own luxury items such as a yacht, an RV, an expensive antique collection, or a high-priced car in which you have sizeable equity, they’ll most likely be sold by the bankruptcy trustee (the person employed by the court to oversee your assets and pay creditors) to pay back some of your debts. After the bankruptcy trustee has paid creditors whatever money is available, your remaining debt is discharged. There are some debts that can’t be discharged in bankruptcy such as:

• Student loans (although rare exceptions do exist)
• Recent back taxes (taxes that were first due less than three years before you file for bankruptcy in which returns were filed no less than two years before your filing date)
• Back child support and alimony
• Debts as a result of acts the creditor proves were fraudulent (for example, misstatements on a loan application).
• Obligations to an ex-spouse that you assumed in a divorce ruling or marital settlement agreement
• Liabilities as a result of willful and malicious actions such as assault or theft
• Liabilities for personal injury or death as a result of drunk driving
• Criminal fines and penalties (either state or federal)
   

Can Filing Chapter 7 Bankruptcy Delay My Foreclosure?

Whether or not you plan to surrender your house, you can delay foreclosure by filing for bankruptcy. The moment you file for bankruptcy, foreclosure proceedings must stop for a period of time. Upon filing, the federal bankruptcy court will automatically issue a stay. The “stay” bars creditors, as well as mortgage lenders, from taking any action to collect a debt you owe unless the creditor obtains permission from the bankruptcy court to carry on and the court grants the go-ahead after a notice and a hearing. The stay instantly stops foreclosures as well as other creditor actions. Even if your home is scheduled to be sold on a certain day at 11 a.m., and you file for bankruptcy at 10:59 a.m. that same day, the sale of your home is “stayed” and cannot be legally processed even if the auction were to continue. If however you filed for bankruptcy just one minute after the sale, the sale would legally hold.

How Many Months Can Chapter 7 Bankruptcy Delay My Foreclosure?

It takes around three months for a Chapter 7 bankruptcy case to go through the court process. Once the court grants a Chapter 7 discharge your lender is free to continue the foreclosure of your home. It is absolutely crucial you take full advantage of every legal right available to you. Contact us today for a free initial consultation to help ensure you take the proper steps throughout this complicated process.

What Exemptions Am I Entitled to Under Chapter 7 Bankruptcy?

Certain homestead property, retirement income, insurances, personal property, public benefits, tools of trade, and wages are protected under Texas State Law and cannot be taken from you during Chapter 7 Bankruptcy when you meet certain criteria. For a more complete list of Texas Exemptions please view:

Texas Bankruptcy Exemptions
 

How Do I Know If Chapter 7 Bankruptcy Is Right For Me?

Choosing whether to file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy can be difficult because of the many factors involved. Please contact us for a free initial consultation so that we are able to properly assess which Chapter will best suite your needs.