In a Chapter 7 bankruptcy case, the court discharges your debts and you get a “Fresh Start”. Chapter 7 bankruptcy is a liquidation. A trustee is appointed to examine your assets and sell any assets which are not exempt. The net proceeds of the liquidation are then distributed to your creditors with a commission taken by the trustee overseeing the distribution. After the distribution any remaining debt is forgiven or “discharged.” Most Chapter 7 filers will be able to keep or “exempt” all their assets and receive a discharge and the creditors receive nothing.
Certain debts cannot be discharged in a Chapter 7 bankruptcy, such as alimony, child support, fraudulent debts, certain taxes and some student loans. In the vast majority of cases this type of bankruptcy is able to completely eliminate all of the filers’ debts.
You may keep certain secured debts such as your car or your furniture or house by reaffirming the debt or otherwise continuing normal monthly payments. To do so, you may be required to sign a voluntary “Reaffirmation Agreement”. If you decide that you want to keep your house or your car or your furniture, and you reaffirm the debt, you cannot bankrupt (or wipe-out) that debt again for eight years. You will still owe that debt and you must continue to pay it just as you were to continue to pay it before you filed the bankruptcy. You can selectively reaffirm your debts – you can state that you wish to keep the house and the furniture, for example, but that you want the car and the jewelry to go back to the respective creditors.
Reaffirmation agreements can be set aside during the earlier of 60 days after the agreement is filed with the Court, or upon the Court’s issuance of the discharge. The lawyers at Pepper and Nason can guide you through this process and give advice to whether you should reaffirm such debts.
To find out if bankruptcy is right for you, please fill out a questionnaire at our Free Consultation – Bankruptcy and Debt page or contact Pepper and Nason by calling us at (304) 346-0361 today. There is no charge for the initial office visit.