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Chapter 7 bankruptcy, also called straight bankruptcy, helps debtors to liquidate some of their debts, mostly unsecured, and enables them to make a fresh start in life without being incessantly harassed by the creditors' calls for refunds. Cases filed under chapter 7 are usually decided within a period of four or five months.
You can file for bankruptcy under chapter 7 or chapter 13. Yet there is a basic difference. If you file under chapter 13, you'll be asked to pay your debts, partially or wholly, in installments over a period of time. The time period may range from three years to a maximum of five years, as the case may be. In contrast, if you file for bankruptcy under chapter 7, most of your financial liabilities will be liquidated completely.
It is important to point out that under Chapter 7, you will not be exempted from paying off secured debts such as loans attached to a property or a car. All secured debts like mortgages, car loans, alimony, and state taxes have to be paid.
It is important to note that if you file for bankruptcy under Chapter 7, you will not be forced to sell off your necessary assets such as your car and house, as these and similar possessions are necessary to start life afresh. You are eligible to file for chapter 7 bankruptcy if you are single, a married person, or if you own a small business, whether as a sole proprietor or a partner. You must, however, realize that you can file for Chapter 7 only once in six years. Also, you cannot file if your previous bankruptcy case was dismissed by the court within the preceding 180 days.
You must keep in mind that your case will be dismissed if you try to deceive the bankruptcy court in any way or make false statements about your assets. Your case also stands to be dismissed if you have not been honest with your creditors or you have cheated your spouse by hiding your actual assets. The same applies if you transfer them fraudulently to your friends or family members.