What happens when you file Chapter 7?

The filing of a Chapter 7 petition has two principal effects. First, it creates a bankruptcy estate under the Bankruptcy code Section 541 and imposes an automatic stay under Section 362.
Creation of the Estate
Sooner one files Chapter 7 petition, an automatic stay comes in being. This is an immediate stay encompassing all the creditors rights and remedies. The filing of a Chapter 7 petition immediately creates an estate comprising all the debtor’s interests in property other than the interests which can be exempted.
What is an automatic Stay?
An automatic stay is a global injunction against all entities and individuals from any action that may directly or indirectly interfere with the administration of the estate. The automatic stay has certain limitations as well in which the debtor is deemed not to deserve the protection the automatic stay would normally provide.
Presumptive bad faith for serial filers.
When cases are not filed in good faith, the automatic stay does not apply. At least one of those earlier cases was dismissed within the last year after the debtor failed “without real excuse” to file or amend the petition or other document required under the Bankruptcy Code, failed to provide court ordered adequate protection to a creditor, or failed to perform a confirmed plan. The debtor’s financial or personal affairs have not substantially changed since the dismissal of the next most earlier or where there is no reason to conclude that the later case will result in a Chapter 7 discharge or a fully performed, confirmed plan under Chapter 11 or Chapter 13.


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