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Chapter 7 Bankruptcy Attorney in Melbourne, Florida

What is Chapter 7 Bankruptcy?

Chapter 7 is one of the quickest and most comprehensive means for dealing with your debt. All of your creditors are required to participate, which allows you to obtain true debt relief when your case is over.

Chapter 7 bankruptcy is often called a “liquidation” bankruptcy. It is available for business debt or consumer debt, but there are income-based restrictions for Chapter 7 relief if your debt is primarily consumer debt. However, as stated above, if you have no assets that are not exempt, there is nothing to liquidate. If you do have non-exempt assets, you will surrender them to the Trustee, who will liquidate them (convert them to cash) by selling them, possibly back to you if you offer a fair price, which you must pay generally within one year of filing. After your creditors have had an opportunity to object, if no objections are sustained, most of your debts will be discharged (some debts like those arising in divorce, student loan debt, debts arising from criminal acts, and some tax debt cannot be discharged).

Generally you cannot keep property that secures a debt unless you reaffirm that debt, meaning you remain obligated to pay it (examples would be mortgages on homes or car notes). Currently, however, you can “strip” a wholly unsecured mortgage from your home and discharge the debt in bankruptcy. That means if you owe a first mortgage of $100,000, and a second mortgage of $50,000, on a home currently worth $75,000, you can strip the second mortgage and discharge the $50,000 debt, leaving you with only $100,000 mortgage.

Under Chapter 7 it generally takes four to six months to obtain a discharge, and if you have no non-exempt assets for the Trustee to liquidate your bankruptcy would most likely close quickly thereafter. There are factors that can make discharge take longer, and assets to liquidate create a bankruptcy estate that the Trustee must administer (account for and divide among the creditors).

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