Chapter 7 Bankruptcy: The Basics

Bankruptcy is a creature of federal law and is found in Article I, Section 8 of the U.S. Constitution which states that Congress shall have the power to “establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States.” Thus, the ability to seek bankruptcy protection is a constitutional right conferred on every citizen.

Bankruptcy law predates the founding of this country.  In fact, its history can be traced back to the Old Testament.  In other words, the notion of allowing a person to be forgiven his debts is nothing new.

A Chapter 7 bankruptcy proceeding is named after the heading “Chapter 7 – Liquidation,” of the United States Bankruptcy Code, which is cited at 11 U.S.C. § 701, et seq.  Basically, under Chapter 7 of the U.S. bankruptcy code, the debtor (the person who owes the money and who is filing for bankruptcy) seeks to be forgiven of all or most of his or her debts and therefore “walks away” from them after the bankruptcy case is over. The legal term for the forgiveness of these debts is called a “discharge.”

Most Chapter 7 cases filed in the state of Georgia are considered “no asset” cases. This doesn’t mean that the debtor doesn’t own any property; rather, it means that all of the debtor’s property is exempt under Georgia law from seizure and sale by his creditors and the Trustee.  Most of these debtors keep all of their belongings or assets (including their house and vehicles) while simultaneously eliminating all of their credit card debt, unpaid medical bills, finance company debt and other unsecured debt such as pay day loans.

Determining what you can keep and what you can eliminate requires consulting with someone who has technical expertise in bankruptcy law. That’s why it’s important to contact an experienced attorney who can properly advise you as to your options and guide you through the bankruptcy process.