How Can a Creditor Stop a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy can be a last resort for a person carrying serious debt. Creditors naturally prefer that at least some money be repaid over getting no money and may try any method available to them to stop a debtor's bankruptcy proceeding. A cooperative debtor can limit these opportunities by delivering honest, in-depth financial information to the court.
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Debts Included in Chapter 7
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Only unsecured debts may be expunged through Chapter 7 bankruptcy. These debts include bills such as credit cards and medical bills involving no collateral that would otherwise force the debtor to pay. A Chapter 7 bankruptcy cannot be used to expunge or restructure secured debts such as home loans or business loans. Any equity a debtor has available in property, however, such as a business or home, may be used to repay his creditors in a Chapter 7 bankruptcy proceeding.
If You Lie About Your Finances
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A creditor may be able to convince the court that your bankruptcy should be denied if they can prove you have misled them about your finances. A creditor may be able to prove this through payment records or documents detailing the transfer of property or money just prior to your bankruptcy hearing. Basically, your creditor is going to tell the court you have the ability to repay them but are choosing not to. If they can prove this, your bankruptcy will be denied. If the court finds you have intentionally misled them, it may leave you open for possible civil and criminal penalties.
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Reaffirming Your Debt
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According to Lawyers.com, a creditor may approach you over the course of your Chapter 7 bankruptcy proceeding with an offer to "reaffirm" your debt. This is an offer from a creditor to repay your debt with them which will allow you to keep any property tied to that debt. This is particularly useful when attempting to save an automobile or piece of real property which can otherwise be sold off as part of a Chapter 7 liquidation. Once you reaffirm a debt, it effectively ends the bankruptcy process with that creditor.
The 341 Hearing
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The 341 hearing or meeting of the creditors is held 20 to 40 days after the petition for bankruptcy relief is filed. You as the debtor are required to attend the hearing and answer questions under oath from a court-appointed trustee who oversees your particular case. Your creditors are permitted to ask you questions as well. This is your creditor's last ditch effort to convince the court that your bankruptcy should be denied. If you are uncooperative at this hearing, the trustee may present an opinion to the court that your bankruptcy should be stopped which would leave you at the mercy of your creditors.
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