Tips For Including The Right Debts On Your Chapter 7 Plan

Law Blog

Chapter 7 bankruptcy is the plan people use for debt-elimination purposes, and including the right debts on your plan is a vital step. When you file, your lawyer will assist you in this, but here are some essential steps to help you understand how this works.

The Basic Principles of Chapter 7

If you do not understand the basic principles of this branch, you should start here. Chapter 7 has two key principles to know about:

  1. It provides a discharge of qualifying debts — The discharge eliminates debts through forgiveness. You will no longer owe them if the debts qualify.
  2. You surrender assets to the court — If you have assets to sell, the court could take them from you. They cannot take every asset you own, but they can take any that qualify.

The court takes assets only if they can sell them and raise cash. The cash pays off some of the discharged debts. While creditors will not receive all the money that you owe them, they may receive a small amount.

You Must List Every Debt

Another key principle of Chapter 7 is that you must list every debt you have, even if you owe nothing on it or do not want to include it. You cannot pick and choose which ones you list. To make sure that you list each debt, your lawyer will complete a few steps.

Step one is pulling your credit report. Your lawyer will include any open account listed on your report, including credit card accounts with zero balances. Next, the lawyer will ask you for a list of debts, and you will need to provide this. You should carefully look through all your bills and paperwork to make sure you give your lawyer evidence of every amount you owe.

You May Need to Use Reaffirmation Agreements

If debts qualify for a discharge, the lawyer will list them on the bankruptcy documents. If you have any assets that you owe money on that you wish to keep, you will need reaffirmation agreements. A reaffirmation agreement is quite prevalent with car loans and mortgages. Filling one out and sending it to the lender means that you are requesting to keep the asset on the condition that you agree to continue paying for it.

These are some basic principles to understand about listing debts on a Chapter 7 plan. For more information, talk to a chapter 7 bankruptcy lawyer in your area.


26 February 2020