Chapter 7 – A Liquidating Process

Chapter 7 bankruptcy is the process of cancelling out your debts through liquidation.  Often times this form of bankruptcy is called the ‘straight’ or ‘liquidation’ bankruptcy.  Here are the things that you should know about Chapter 7:

Process

The first step of filing for Chapter 7 is to gain a petition.  Once you have this you will be assigned a trustee to take over your case.  They are knowledgeable about assets and properties, and they will be responsible for separating your unsecured debts from your secured debts.  From there you will have to pay off your secured.  It’s the unsecured debts that take a little more consideration.

The trustee will look at your properties and classify which ones are exempt and which are non-exempt.  They will then liquidate your non-exempt properties and pay off your creditors. 

Essentially you are putting all of your trust into the trustee.  You will no longer have control over your financial affairs or your property.  They are responsible for selling off your assets, and repaying your creditors. 

Cost

It costs around $300 dollars to file and administrate the Chapter 7 bankruptcy process.  It will also cost a decent amount of your time.  The process usually takes anywhere from four to six months, and may require courthouse visits. 

Who is eligible?

If you have already had a bankruptcy discharge in the last 6-8 years you will not be eligible to file again for Chapter 7.  Also, your income and expenses will be looked at, and it will be determined if you are in the position to feasibly repay your debts.  If it is determined you can repay, then you will be put on a Chapter 13 repayment plan. 

Bankruptcy is a tricky concept, and there are many things that need to be known before filing.  It’s always advisable to talk to a lawyer before, and throughout the duration of the Chapter 7 process.  

What if Your Debtor Does Not Have Anything to Liquidate?

With growing debt the words ‘Chapter 7 Bankruptcy’ are beginning to be heard more often.  As you know, Chapter 7 bankruptcy involves liquidating the non-exempt assets and paying off your debt.  All of your debts are separated into secured and unsecured.  The secured debts will have to be lawfully paid off or the collateral will be taken.  The unsecured debts will be put into two categories, and from there the assets will be liquidated.  However, the question must be asked, what does one do in the case of no assets? 

What is a no-asset case?

As has been previously stated, when Chapter 7 is filed the assets for unsecured debts are separated into two categories.  These categories are exempt and non-exempt properties. 

It’s the non-exempt properties that are eligible for liquidation to pay off creditors.  A trustee is assigned to the properties, and they are in charge of liquidating them and gaining the cash to pay off the creditors.   However, more often than not there aren’t any assets that would fall under this category.   This would be considered a no-asset case.

What happens when there is a no-asset case?

When a no-asset case is presented, the creditors do not get paid from the unsecured debt. There isn’t any property to be liquidated, so there isn’t any cash to be handed off.  This results in the debtor’s debt being discharged, and the credit card company not receiving a payday.  Most lawyers will do their best attempt in making sure their client (the debtor) doesn’t have any non-exempt assets throughout the liquidation process. 

 

Debt collection attorneys specialize in realizing when a property should be considered non-exempt.  Despite the relentlessness of the other side, collection attorneys are able to aid the debtee in collecting the debt that is entitled to them.  

Can You Liquidate for Credit Card Debt?

Credit card debt is one of the largest forms of debt that people are getting into.  Accessible usage and high interest rates make credit cards one of the easiest ways to sink into a financial crisis.  When this happens, the debtor has a major option to think about pertaining to bankruptcy.

Those that have credit card debt are eligible to file for Chapter 7 bankruptcy.   The filing of Chapter 7 bankruptcy is a contract that is making the debtor’s property available for liquidation.  This will relieve the debtor of their unsecured debts. 

What are unsecured debts?

Unsecured debts are debts that are not backed by some form of collateral.  Most debts, such as home mortgages and automobiles are secured.  This means that if the payments are not made, the company can relinquish the home or vehicle that is being used as collateral.  However, when it comes to Chapter 7, it’s the unsecured debts that are able to be relieved. 

What is the Chapter 7 process?

Once it has been established that a Chapter 7 bankruptcy petition is going to be filed, there is then a trustee that is assigned to oversee the ordeal.  It’s the trustee’s duty to separate exempt and non-exempt property.  From there, the creditors are notified that a Chapter 7 petition has been filed. 

Subsequently, all of the non-exempt property of the debtor is then liquidated.  The cash that is received from this liquidation is then passed out to pay the creditors.  If there is any remaining cash it may go to the claim’s company. 

Once the credit card companies have been paid, the debtor is then discharged of the preceding debts.  Credit card debt is a messy thing to get into, and it is definitely the slipperiest of slopes when it comes to debt.  Steer clear of this kind of debt, and keep track of your finances.  

Why do Collection Law Firms Outperform Collection Agencies?

To ask the question ‘What has a better outcome- a collection agency or a collection law firm?’ is the same as asking ‘What is better, a diner or a 5 star restaurant?’.  Both offer food, however one obviously excels over the other.  In this case, it just so happens to be the collection law firm that excels.

One of the main reasons why a collection law firm out performs a collections agency is based on the fact that collection law firms have much more legal rights.  An agency cannot perform nearly as many duties as a law firm.  

A collection agency is merely an agency.  They can make phone calls and write letters.  That is basically the extent of their legal boundaries.  If the debtor doesn’t pay, there aren’t any real consequences coming from the agency.  This is where the law firm and agency differ.  A collection law firm is able to all of the same things as an agency; however they can also file suits.  Debtors are typically much speedier in payments if they know a credit hurting suit can be filed against them.  

Also, in the long run, a collection agency can potentially cost you more money.   When a collection agency is not able to collect, which is often, they have to then turn the case over to an attorney who can file a suit.   This leads to more money being paid out by the one who is seeking a collection.  The most efficient thing to do is to just cut out the middle man (the agency) and hire the attorney in the beginning.  

It’s also important to consider the types of people that will be taking your case.  With a collection firm you are guaranteed to have educated, motivated individuals who will be able to know the full realm of your claim. A collections agency cannot grant the same expert treatment that you will receive from a collections attorney. 

With that being said, it really does depend on the size of the debt that is being collected.  While law firms stand strong on their legal ground, collection agencies have call centers, and technological features, that simply cannot be matched by a law firm.