The History and Purpose of Chapter 7 Bankruptcy: What You Need to Know
Since the 1800s, the U.S. has provided bankruptcy protection to consumers who need it. Chapter 7 bankruptcy, also known as liquidation bankruptcy, discharges most unsecured debts, but it wasn't in the original U.S. bankruptcy code, only coming into being in the late 1970s.
The Craig Black Law Firm focuses on bankruptcy filing for consumers who need it. Whether you file Chapter 13 or Chapter 7, I can help you through each phase of the process. If you're considering a bankruptcy filing, call me at 678-888-1778 or complete my confidential contact form, and I'll speak to you about your case.
The History of Bankruptcy
In a primitive form, debt dates all the way back to ancient civilizations. Debt was mentioned in the Code of Hammurabi in Babylon, which provided options for surrendering property to repay debt.
However, the U.S. Bankruptcy Code only dates back to 1800. That was the year of the first bankruptcy law, which was repealed three years later. Throughout the 1800s, bankruptcy laws came and went, only taking permanent effect with the Bankruptcy Act of 1898. Multiple reforms have been enacted in the years since, but that act served as the foundation for bankruptcy protections today.
Chapter 7 bankruptcy was introduced as part of the Bankruptcy Reform Act of 1978, which took effect on October 1, 1979. This legislation established the foundation of Chapter 7 as we now know it, allowing consumers to wipe out all debt and get a fresh start.
Chapter 7 Bankruptcy's Primary Purpose
At its heart, bankruptcy is designed to give U.S. consumers a fresh start. For decades, those facing overwhelming debt have been burdened with phone calls from creditors and debt collectors, in addition to threats of ruined credit and possible asset seizure.
After filing for Chapter 7 protection, debtors see at least partial resolution to each of these issues in the following ways:
- An automatic stay upon filing that stops creditors and debt collectors from continuing their efforts.
- Discharge of eligible debts, giving consumers a fresh start.
- Prevention of lawsuits and wage garnishment.
- Protection for some essential assets from asset seizure.
Chapter 7's Purpose for Creditors
Since the bankruptcy process was designed for debtor protection, the benefits for creditors are limited. But the system does offer some assistance to creditors in the process, including:
- The right to object to a bankruptcy filing.
- Court seizure of assets to help offset financial loss.
- Fair and equal distribution of seized assets to all eligible creditors in priority debt order.
- If secured debts remain unpaid, permission to collect non-exempt assets that were used as collateral.
- Legal closure for creditors and debt collectors, who can write off bankruptcy-discharged debt as uncollectible.
How the Craig Black Law Firm Can Help
The Craig Black Law Firm understands that debtors have questions about the Chapter 7 filing process and the protections it offers. If you're considering Chapter 7, call me at 678-888-1778 or fill out this contact form.