What I Learned About Chapter 7 Bankruptcy
We all understand that filing for bankruptcy can be a stressful and draining process. However, I have often heard in passing about filing for a specific type of bankruptcy called, “Chapter 7 bankruptcy.” Before writing this blog, I had no idea what that meant. Does “Chapter 7” refer some pop culture reference in a novel? Because of my lack of knowledge, I decided to do a little research so I could understand what Chapter 7 bankruptcy means.
To my surprise, Chapter 7 was not a term pulled from the “great American novel.” Instead, Chapter 7 refers to a portion of the United States Bankruptcy Code. This chapter of the Code deals with liquidation, which describes the process of redistributing the assets and property of some entity to pay back creditors. Chapter 7 bankruptcy is one type of bankruptcy in the United States. Other types of bankruptcy include Chapter 11 and Chapter 13 bankruptcy. Of all of the types of bankruptcy, Chapter 7 is the most common type of bankruptcy in the United States.
Businesses and individuals can both file Chapter 7 bankruptcy. I was more interested in the individual aspect of the liquidation process, so I decided to focus my research on that. For individuals, Chapter 7 bankruptcy does not mean the individuals that files must give up all of their property. Instead, the Code points out that there are certain types of property exempt from liquidation. The types of property that are exempt from Chapter 7 varies from state to state. Ultimately, like most bankruptcy filings, the point of a Chapter 7 bankruptcy filing is to ultimately discharge debts. However, some debts cannot be removed by Chapter 7 bankruptcy like child support obligations, student loans, and fines imposed for some types of criminal conduct.
During my research, I came across a particularly interesting article by Erin Shank that described Chapter 7 bankruptcy in the context of military personnel and veterans. The article explained that United States Congress passed a law in 2005 that was designed to help disabled veterans, military members on active duty, and members of the National Guard get financial relief through Chapter 7 bankruptcy. Through these laws, after the Chapter 7 process, these people can restore security clearances and get housing waivers that are being held by prior landlords.
The ideas and thoughts expressed in this article highlighting that the Chapter 7 bankruptcy process is facilitated by former and current military members let me breathe a sigh of relief. Too often, the brave members of the military are forgotten or neglected in this country. It was refreshing to see legislative action in the form of making a stressful and challenging process like Chapter 7 bankruptcy more accessible for these brave individuals. Those who served our country deserve this.