A Chapter 7 Bankruptcy is where we pull all of our debts together to be erased.
This is also known as a straight bankruptcy.
Unfortunately, not all of our debts will be erased, but most of them are erased or “discharged”.
The idea is that you file for bankruptcy, then the bankruptcy trustee will gather up all of our assets and liabilities, and the trustee will decide if he or she can take those assets to pay off the debts.
For example, if you have a $200,000 house paid for, that will be sold to pay off the debt you are trying to discharge.
But for most who file a chapter 7 bankruptcy, there are no assets. This is even known as a “no asset” case.
Since that’s the case, the concept is that you go through this bankruptcy and come out the other side with a fresh start.
This means we’ve erased medical debts, credit card debts, and car loans. But you still have your income intact.
However if we have a secured loan, such as a mortgage, that loan technically would be discharged and the mortgage company can take our house and foreclose on us. But normally you would “re-affirm” the loan — agree to the terms again — and you just pick back up your payments.
Sometimes you do not re-affirm the loan but normally you can continue to make payments if you want to live in the house. It gets a bit odd as you are making payments on a loan you don’t owe and the mortgage company is not foreclosing even though they have the right to foreclose.
If you have any questions on that, you can get with your bankruptcy lawyer.
Remember when we file a Chapter 7 bankruptcy, we’re not making payments into court like you do with a Chapter 13 bankruptcy.
We’re just wiping out debt to get you that fresh start.
If you have any questions, you can reach us by phone at 1-205-879-2447.
I look forward to chatting with you!
Have a great day.