CHAPTER 7 BANKRUPTCY
A Chapter 7 discharge allows you to legally wipe out certain debts, meaning that you will not have to pay them back. Typical debts that can be discharged include credit cards, unsecured personal loans, medical bills, phone bills, utility bills, cable bills, charge card bills, gas card bills and other unsecured debts. Student loans are not dischargeable. In order to get a discharge you must meet certain requirements, including satisfying the means test and being able to provide sufficient documentation to your assigned trustee to justify or explain your financial condition. Many clients find that Chapter 7 is too burdensome because it can subject them to an audit by the US Trustee and because they may face overly aggressive Chapter 7 trustees looking to find or sell assets. Chapter 7 also can result in litigation in the bankruptcy court called an adversary proceeding. Types of suits possible include fraudulent conveyance litigation and preferential transfer litigation. A thorough review of a client’s asset transfer history should be done before considering Chapter 7. Many clients find that Chapter 13 is preferable because it may be possible to file a plan that repays only part of the debt and discharges the rest, while avoiding many of the hassles of Chapter 7 bankruptcy. Chapter 13 has its own eligibility requirements but is almost always preferable for someone who has at least some income and can repay part or all of their debts.