Mar 13, · Debts that can be discharged and the amount of the discharge all depend on whether you file Chapter 7 or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, the trustee divides your nonexempt assets among your creditors, and any remaining debt will be discharged. In Chapter 13 bankruptcy, you enter a repayment plan that repays all or most of your debt. An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7. Three years later, Josh filed for Chapter 7 bankruptcy. His debt totaled $,, $5, of which he still owed to Big Boat. The trustee sold the sailboat for $15, Because Big Boat had a lien against the boat, the trustee paid Big Boat the balance of $5, and distributed the remaining $10, (minus trustee fees) to the other creditors.
That includes calling, sending letters, or suing you over the debt. However, creditors and lenders can enforce any liens attached to secured debts that they hold against you. They can still repossess and sell any property attached to a loan or lien, even after the associated debt has been discharged.
Chapter 13 allows some debts to be discharged that can't be discharged in Chapter 7. It includes marital debts created in a divorce agreement exclusive of spousal support or alimony , court fees, certain tax-related debts, condo and homeowners' association fees, debts for retirement loans, and debts that could not be discharged in a previous bankruptcy.
Debts that can be discharged and the amount of the discharge all depend on whether you file Chapter 7 or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, the trustee divides your nonexempt assets among your creditors, and any remaining debt will be discharged.
In Chapter 13 bankruptcy, you enter a repayment plan that repays all or most of your debt. At the end of your repayment plan, the remaining debt will be discharged. Debts that are likely to be discharged in bankruptcy include credit card debts, medical bills, lawsuit judgments, personal loans, obligations under a lease or other contract, and other unsecured debts. However, that cannot be discharged in either type of bankruptcy. Section a of the Bankruptcy Code describes the types of debt that may not be discharged.
It is extremely difficult—if not impossible—to discharge student loans in bankruptcy. However, some debts cannot be discharged under Chapter 13 bankruptcy, including the following:.
According to the United States Courts, discharge for Chapter 7, bankruptcy usually occurs about four months after the date you file your bankruptcy petition. However, just because the trustee can't take and sell these assets doesn't mean you'll get to keep them in the long run. When you're behind on your payments, your creditors can still foreclose on your home or repossess your vehicle once you complete the bankruptcy process. If you want to keep possessions that are securing your debts, you may have to continue making payments on the loan if you're not already behind or pay the full price to purchase the item.
Generally, the entire Chapter 7 process from the initial credit counseling to the point when the court discharges your remaining debts takes about four to six months.
Your case could take longer, however, such as when the trustee asks you to submit additional documents or if they have to sell your property to repay creditors. Or, perhaps you want to try to get your student loans discharged in bankruptcy.
It's possible, but difficult, and can require a lengthy trial. A Chapter 7 bankruptcy is a major derogatory mark that can hurt your credit for years to come. The Chapter 7 bankruptcy record can stay on your credit reports for up to 10 years from the filing date, and a completed Chapter 13 bankruptcy can remain on your credit report for seven years from the filing date. The accounts that were included in your bankruptcy may fall off your credit report earlier, as most negative marks get removed after seven years.
How to File for Chapter 7 Bankruptcy You can choose to file for Chapter 7 bankruptcy on your own or hire an attorney to help. Some legal aid centers and nonprofit credit counseling agencies may also be able to offer you free assistance. Once you determine that you're eligible, the process will be largely the same:. Filing bankruptcy can be financially, physically and emotionally draining.
However, it may be your best option when bills keep piling up and you don't have the means to pay your creditors. It's also possible to recover from bankruptcy and rebuild your finances and credit, but it will take time. What's on Your Credit Report? Stay up-to-date with your latest credit information for free and learn what lenders might see when reviewing your credit.
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But if the case appears to be an "asset" case at the outset, unsecured creditors 7 must file their claims with the court within 90 days after the first date set for the meeting of creditors. A governmental unit, however, has days from the date the case is filed to file a claim. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim.
Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor's property should consult an attorney for advice.
Commencement of a bankruptcy case creates an "estate. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.
The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. The trustee accomplishes this by selling the debtor's property if it is free and clear of liens as long as the property is not exempt or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.
The trustee may also attempt to recover money or property under the trustee's "avoiding powers. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate.
Section of the Bankruptcy Code governs the distribution of the property of the estate. The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case. The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible.
A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge.
Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case — generally, 60 to 90 days after the date first set for the meeting of creditors. The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party.
Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management.
Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property such as an automobile , he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy.
In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt. If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.
Among other things, the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor's personal liability for that debt will not be discharged in the bankruptcy. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt.
If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.
If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement. The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependants.
The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement. The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case.
A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders.
The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable.