Chapter 7

Chapter 7 bankruptcy focuses on assets and debts at the instant the bankruptcy case is filed. All of the debtor's assets as of the moment the petition is filed (except for exempt property) can be liquidated by the bankruptcy trustee for payment to creditors. The bankruptcy covers all debts as of the moment the petition is filed. Generally, property acquired by the debtor and debts incurred after the petition is filed are not included in the bankruptcy.

The purpose of filing a chapter 7 case is to obtain a discharge of existing debts. Some debts are not discharged: many taxes; almost all student loans; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; and debts for death or personal injury caused by operating a motor vehicle while intoxicated from alcohol or drugs. Also, the bankruptcy court may except a debt from the discharge if the creditor can prove that the debt arose from fraud, theft, breach of fiduciary duty, or from a willful and malicious injury.

Individuals whose debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be permitted to proceed under chapter 7. If your income is greater than the median income for your state of residence and family size, in some cases, creditors have the right to file a motion requesting that the court dismiss your case. It is up to the court to decide whether the case should be dismissed.

With few exceptions, individuals must complete credit counseling before filing any form of bankruptcy.

Individuals must complete a personal financial management course with an approved provider after filing bankruptcy but before the bankruptcy discharge is scheduled to issue.
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Stephen K. Haynes
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Bankruptcy Basics
 (from US Courts)