Chapter 7 Bankruptcy can Eliminate many of your Debts

Chapter 7 is a Liquidation Plan

Chapter 7 is a liquidation plan. All your assets, except for certain exempt assets, are liquidated to pay off your creditors, including your mortgage lender.

After your Chapter 7 petition is filed, creditors cannot pursue you or your assets for repayment of debts. They are enjoined (forbidden) by the Automatic Stay of the Bankruptcy Code from taking any action without Court permission.

About 30 days after filing, a meeting of creditors is held. This meeting is generally only attended by you, your attorney, the trustee and other debtors and their attorney's. The trustee asks questions regarding the preparation of your papers and may inquire about some of the assets or debts listed on the documents.

Time until Discharge

Approximately four to six months after filing, you receive a discharge from your debts.

Generally, the a mortgage will be able to continue with its foreclosure after a relatively short period of time (30 to 90 days.) Many times (but not always) they wait until after your discharge. In practical terms this means you can live in your house without making payments until after the discharge (and after the foreclosure proceedings run their course.)

If you have equity in your property, the bankruptcy judge may stop the foreclosure for a reasonable period of time so you can sell the property and get your equity. This is where Chapter 7 can be really important.

Saving Your Home Requires Chapter 13

If you want to save your home, rather than just postpone its foreclosure, you need to look at a Chapter 13 Bankruptcy.