During these difficult economic times, many Muslims are facing unemployment, foreclosures and unpaid bills through no fault of their own. Stories of individuals or businesses filing for bankruptcy have become more common. The most common type of bankruptcy filing occurs when an individual liquidates his/her assets in a “Chapter 7” bankruptcy. Some common reasons one may file for Chapter 7 bankruptcy are unemployment, large medical expenses or serious credit problems.

When one files for Chapter 7 bankruptcy, his/her assets are converted into cash and distributed to creditors according to the creditors’ claim priority. Thereafter, the debtor is relieved of personal liability for any debts and creditors cannot take any further action to recover a discharged debt. One may not file for Chapter 7 bankruptcy if he/she makes enough income to repay a substantial amount of debt within five years. Debts may not be discharged if the individual filing for bankruptcy conceals property, makes fraudulent transfers, fails to keep records of financial transactions or fails to comply with bankruptcy court orders

There are positives and negatives to filing for Chapter 7 bankruptcy. A Chapter 7 bankruptcy may take almost all of an individual’s assets to repay creditors, but it may create an almost immediate halt to creditors’ requests for many types of payments. If one wishes to maintain a family home, business, credit history, or other asset, Chapter 7 is likely not the best option. For more information on filing for bankruptcy or for specific legal advice, contact a licensed attorney in your jurisdiction.

The author of this article can be reached via email at Justice360@muslimcongress.org. For more information about Justice360, visit http://www.muslimcongress.org/360.

DISCLAIMER: Justice360° Legal Bulletin’s are meant to assist in the general understanding of the current law relating to the stated topics. JUSTICE360° LEGAL BULLETINS SHOULD NOT BE REGARDED AS LEGAL ADVICE. Organizations or individuals with specific questions should seek the advice of legal counsel.