Chapter 7 Bankruptcy

Chapter 7 of the title11 of the U.S code deals with the process of liquidation incase of bankruptcy under the U.S law

. This is the most common form of bankruptcy in the United States and thousands of Americans file for bankruptcy every month. It provides a fresh start to those who can no longer afford to carry their debts; it provides a chance to rebuild their credit. The businesses in debt and unable to service that debt or pay its creditors may file for bankruptcy under this law which means that the business ceases operations until a trustee is appointed. The trustee examines the financial affairs and sells the assets and distributes the proceeds to the creditors. Once all the debts have been administered the case is closed. Individuals may file for bankruptcy in a federal court; however, those people who have had bankruptcy cases dismissed within the previous 180 days are not eligible. Many types of unsecured debt are discharged under this law but common exemptions include child support, income taxes less than 3 years old, property taxes, student loans, fines and restitution imposed for crimes.

Methods of filing bankruptcy:

federal bankruptcy forms

bankruptcy software

non-attorney petition

bankruptcy attorney

The Means Test:

Before filing for bankruptcy one has to qualify the means test in order to be eligible. Its a two-step process which begins with median income comparison and the next step is calculating disposable income for the next 5 years. If your income is at or below the median income and your disposable income is less than $6000 then you qualify for the chapter 7 bankruptcy protection.

Credit Counseling:

The law also requires that the credit counseling briefing be done from a certified agency before filing the chapter 7. The agency will explain financial management, budgeting and also give you alternatives to filing bankruptcy. There are exceptions to this rule but most debtors are required to get this briefing before filing bankruptcy and a failure to do so may result in the case being dismissed.

Bankruptcy lawyer:

The next step is to provide all the information to your bankruptcy attorney who reviews your case and prepares a petition which he files in your local bankruptcy court. All your personal information including all the assets, expenses, debts and any exemptions which you are entitled to have to be listed on the petition and related forms. All information has to be disclosed as bankruptcy fraud is a serious offence and liable for prosecution. A bankruptcy lawyer helps to prevent bankruptcy fraud. Once the petition is filed a trustee is appointed and an automatic stay is entered to prevent creditors from taking further action. Exemptions protect certain property, which typically include the primary residence, tools, work equipment, vehicle, certain items of personal property and numerous other categories of property from liquidation in bankruptcy. The specifics vary from state to state.

Secured debts:

The secured debts cannot be discharges as they are attached to the asset that secures them i.e., if a car loan is to be discharged you need to give back the car. However, if you want to retain the asset then a reaffirmation agreement is negotiated with the creditors under chapter 7 bankruptcy. You have to continue making the payments in order to retain your asset.

The last step is getting your bankruptcy discharge and completing an approved Debtor Education Course: a personal financial management course required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, referred by your bankruptcy attorney. Filing bankruptcy is a decision which shouldnt be taken lightly, however, if youre in a difficult financial situation and unable to cope then this may be the opportunity to seek protection from creditors and regain control of your life and rebuild your credit.

by: saratremellaw

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