CHAPTER 7 BANKRUPTCY LAWS
There are five main types of bankruptcy cases set forth in the United States Bankruptcy Code. Here we discuss Chapter 7 Bankruptcy Laws; one of the 2 types of bankruptcy most
frequently used by individuals.
Here's a link for Chapter 13 Bankruptcy Information.
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Chapter 7 Bankruptcy Laws
Chapter 7 Bankruptcy Laws are referred to as "liquidation" or "fresh start" bankruptcies.
They focus around a bankruptcy court-supervised procedure by which a
trustee (an individual appointed by the United States Department of Justice to oversee specific bankruptcy cases) collects
the assets from the person filing the case (this person is known as a debtor).
The "trustee" then sells the assets and pays the debtor's
creditors with the sale proceeds (a creditor is the person or entity to whom money is owed by the debtor).
Chapter 7 Bankruptcy Laws allow the debtor to keep certain property. This property is determined by state or federal laws and is referred to
as exemptions or exempt property.
A creditor whose debt is secured by property (i.e. there is a lien or a mortgage on
that property) has a right to repossess or foreclose on that property if the debtor does not continue making payments on
that debt - even if bankruptcy has been filed.
In those cases where the property is exempt or has no equity, and
where the debtor is current or relatively current on the amounts owed on the debt secured by the property, the debtor
can keep that property by agreeing with the creditor to pay what the creditor is owed on the debt.
In most Chapter 7
cases, the debtor has little or no property that is not exempt or that has any equity or value. The trustee will only
sell non-exempt property that has equity (i.e. is worth more that what is owed on the property) since it is one of the
trustee's goal is to obtain money to pay the debtor's creditors.
If the debtor owes more on an item of property than
what it is worth, there will be no proceeds generated by the sale of that property by the trustee
(since the secured creditor must be paid from the sale proceeds first - and, as such, the trustee does not even bother
to attempt to sell property with no equity).
Therefore, according to Chapter 7 Bankruptcy Laws, in most cases, there will not be an actual sale of
the debtor's property - these are referred to "no-asset cases."
Chapter 7 bankruptcy laws were created for best use by the debtor when the debtor owns no real property or has no equity in the
real property that is owned (and is current on all payments to any secured creditors holding mortgage or liens on the
property), when his or her personal property is either exempt, has no equity or is of little value, and when the debtor
has significant unsecured debts (most credit card debt, medical bills, personal loans, etc.) that are intended to be
Since the debtor can, in those situations, eliminate unsecured debt and retain his or her real and
personal property, this type of bankruptcy is attractive to qualified persons.
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1. Release and Settlement Agreement
2. Credit Collection Cease Communication Letter
3. Expired Statute of Limitations Notice Letter
4. Credit Inquiry Information and Removal Letters
5. Letter to a Credit Report Agency That Co-Mingled Information
6. Letter to Credit Reporting Agency - Dispute Letters
7. Debt Collection Dispute Letter Packet
8. Good Will Adjustment to Remove Late Payment
9. Notice of Harassment to Debt Collector/Agency/Attorney/Firm
10. Negotiating a Settlement With Utility, Cable, or Satellite Companies
11. Letter to Settle Past Due Account
12. Negotiating Settlements with Creditors for Separation and Divorce Issues
Plus: Letter to Update Accounts or Debts That Were Discharged in a Bankruptcy
Common Mistakes Before Bankruptcy
There are many common mistakes that are often made before and during the bankruptcy process. Here is a short list of them:
Repaying money to relatives
If you repay a relative anytime during the year prior to filing bankruptcy, the trustee can sue the relative to receive
the money back to distribute to all of your creditors equally.
Not listing all creditors
Make sure to list every single person or company you owe money to. Only if this list is completely accurate and complete
will those debts be discharged at bankruptcy.
Shifting assets to your children's name or a relative just prior to filing for bankruptcy is not permitted.
Bankruptcy laws require full disclosure of all assets. The FBI fraud division, IRS auditors, and the Executive
Office of the U.S. Trustee investigate bankruptcy filings. They will eventually find your assets even if you do not have
them listed in your paperwork. It is a federal crime, a felony, to commit bankruptcy fraud. Do not take chances.
Be careful about credit consolidation companies. The airwaves are inundated with consolidation companies urging their
solutions as a way to "avoid bankruptcy." However, even if you negotiate lower payments or a restructure your debt
outside of bankruptcy, your credit score is still adversely affected just as with bankruptcy.
You also should be aware that there could be income tax liability. In addition, don't be fooled, "not-for-profit"
doesn't mean "free." These organizations are typically capitalized by banks and the credit card industry because
they want to try to collect as much money from you as possible.
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Dealing With Bankruptcy?
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