Also known as, regular bankruptcy, straight bankruptcy or liquidation bankruptcy, Chapter 7 is bankruptcy in the most basic form. Chapter 7 allows you to discharge or cancel certain debt, with no repayment plans. Debts that can typically be discharged include medical, auto, rent, utilities and some credit card debt.
You must give up any of your nonexempt property. The trustee assigned to your bankruptcy may sell this property and divide the proceeds among your creditors. Most states allow you to keep the equity in your home, personal property and assets. You may also keep your retirement accounts and pensions.
Debts not Discharged
Debts that aren’t discharged include secured loans like cars, homes and some merchant credit card purchases. You can choose to forfeit these assets that provide security for these loans to discharge the debt. Most of the time, however, people who file a Chapter 7 bankruptcy don’t lose any assets by filing.
Debts that cannot usually be canceled usually include child support, alimony, taxes, court orders, and student loans.
Which to File?
Most people, given a choice, will want to file Chapter 7 over Chapter 13 if possible. Chapter 7 bankruptcy is shorter than Chapter 13, and more debts may be discharged without repayment. If you and your attorney determine that in your situation it’s a toss-up between Chapter 7 and Chapter 13, it’s almost always a good idea to go with Chapter 7. Contacting a Houston bankruptcy attorney can help you decide which bankruptcy route is best for you.