The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems

Chapter 17. Two Trips through Chapter 7 Bankruptcy

Unless you're Bill Gates, you're just one serious illness away from bankruptcy.

—Dr. David Himmelstein, MD, Associate Professor of Medicine, Harvard Medical School

To help you understand what you will encounter in your bankruptcy case, we present the stories of two debtors who owe consumer debts and file for bankruptcy under Chapter 7 of the Bankruptcy Code: the Henris and the Robinsons. The presentation of realistic cases will help you understand the bankruptcy process, the legal concepts of bankruptcy law, the remedies available to consumer debtors, and what actually happens in a bankruptcy case. Sometimes debtors encounter "bumps in the road" during their bankruptcy cases, so we've included those as alternative scenarios along the way.

All of the bankruptcy forms mentioned in this chapter are available at www.uscourts.gov (see Appendix A or www.wiley.com/go/roadoutofdebt for more information).

CHAPTER 7 Basics

Chapter 7 of the Bankruptcy Code is entitled Liquidation. We find the name somewhat deceptive because in the vast majority of individual cases, debtors do not lose their property. Bankruptcy laws ensure that you do not end up living in a cardboard box after bankruptcy and make some assets exempt and outside the creditors' reach. Your property may be subject to liens and mortgages so that you have no equity in that property, meaning that creditors have a claim to every penny of that property and you have none. If the chapter ...