BACKGROUND

Chapter 7 is the "straight" bankruptcy. It is used by individuals to get a fresh start. A trustee is appointed whose task it is to gather the debtor's non-exempt assets and liquidate them to pay (sometimes) a portion of the creditors' claims. The vast majority of cases do not have any property sold as Texas Exemptions are very broad and cover most property owned by a debtor. Businesses that wish to liquidate and terminate their operations also can use Chapter 7 to close up shop. Partnerships can also use Chapter 7 for debt relief. The Trustee reviews the consumer debtor's budget as is set forth in a document referred to as a Means Testing form. This form analyzes your budget based on congressionally determined guidelines to ensure that you don't have any money left over in your budget to pay on the debts that you are seeking to discharge. Most consumers still qualify for chapter 7 relief in spite of what you may have heard from other sources. Those debtors whose debts consist of a majority of business debts do not have to subject themselves to the "Means Testing" calculation. IRS taxes are not considered consumer debts for these purposes.

Bankruptcy is about giving the debtor a "fresh financial start." Individual debtors can receive a discharge in Chapter 7. This will ordinarily wipe out the debtor's personal liability on dischargeable debts. A discharge is not absolutely certain and will not extinguish a lien on property. Certain debts are not dischargeable such as student loans, certain taxes and certain debts obtained by fraud. You should consult with me to be properly advised on the issues of different types of debt.

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