The Purpose Of A Chapter 7 Bankruptcy

The purpose of a Chapter 7 bankruptcy is to allow a person to obtain a fresh start, free from creditors and free from the pressures of overwhelming debt. Basically Chapter 7 is a plan for personal financial dissolution. As with a business Chapter 7 bankruptcy, a court-appointed trustee takes possession of all nonexempt property and assets, converts them to cash, and distributes the funds to creditors.

Exempt items include specified items, a certain amount of money dictated by the trustee, and some personal effects. Most debtors are able to keep property they need to get on with their lives. After filing for relief under Chapter 7, an individual debtor might, as dictated by the trustee, receive a discharge.

A discharge permanently prohibits creditors from attempting to collect those secured and unsecured debts listed in the bankruptcy filing. These could include past due mortgage or rent payments and penalties, credit card debt, medical bills, or consumer loans. However, some debts are non-dischargeable.

These could include some federal and state taxes, school loans, alimony and child support, criminal restitution, or debts for death or personal injury caused by driving while intoxicated from alcohol or drugs. If individuals receive a discharge under Chapter 7, they cannot receive another discharge under Chapter 7 for the next six years.