Chapter 7 bankruptcy is also known as straight bankruptcy. Most of the debtors file either Chapter 7 or Chapter 13 bankruptcy. The new federal bankruptcy laws have brought about changes in the manner in which consumers file bankruptcy. Filing bankruptcy requires very rigid terms to be fulfilled. This step has been taken to curb the number of debtors filing bankruptcy.

The new federal bankruptcy laws were introduced on October 17th 2005. Consumers intending to file straight bankruptcy, have to undergo the means test. In means test your income will be compared to the state median income of a household in the state in which you dwell. If your income is less than the state median income, you are eligible for straight bankruptcy. Means test in straight bankruptcy has been introduced to allow debtors to file for Chapter 7 bankruptcy that are in genuine need of it.

Straight bankruptcy is also referred to as liquidation in which your non-exempt assets are liquidated or sold off so that your creditors can be paid back. You are also required to take credit counseling session at least 180 days prior to filing bankruptcy. This is applicable for both Chapter 7 as well as Chapter 13 bankruptcy.

There are many debts that are discharged when you file straight bankruptcy but all debts are not discharged when you file straight bankruptcy.

Debts that are discharged when you file straight bankruptcy

The following types of debts will be discharged if you opt for straight bankruptcy. They are as follows –

1. Business debts
2. Claims related to auto accidents
3. Leases
4. Guaranties
5. Medical bills
6. Claims made due to negligence
7. Judgments
8. Tax penalties that have not been paid for more than 3 years etc

Debts that are not discharged when you file straight bankruptcy

Given below are debts that cannot be discharged when you file straight bankruptcy. They are –

1. There are few tax related debts that cannot be discharged
2. Debts that arise as a result of fund abuse, fraud, manipulation etc.
3. Debts that result due to false financial assertions, false pretenses etc
4. If you have accumulated debts as a result of purchasing items of luxury or you have availed cash advances
5. Child support
6. Alimony
7. Marital separation
8. Student loans
9. Debts originating as a result of malicious or willful injury etc

Whether you call it Chapter 7 bankruptcy or straight bankruptcy, it is not good for your credit report. It ruins your credit rating to a great extent and unless you repair your credit you will not be able to take out fresh credit as per terms and conditions that take your convenience into account. So, it is important that you don’t reach a point where you are left with bankruptcy as the only debt relief option. The debt help industry is flooded with various other debt help options so try one of them instead.