Bankruptcy is a procedure that gives an individual a fresh start financially and Chapter 7, also referred to as “straight bankruptcy” or liquidation is a bankruptcy provision that permits the debtor to be able to pay off their personal debts by selling their assets and then using their proceeds among their creditors thereby freeing one from their debts. A court officer referred to as a trustee is usually appointed to supervise the process by observing the filed cases as well as supervising the actions of the debtor and the creditor.
There are different types of bankruptcy, and generally Chapter 7 is the quickest and simplest form and is available to married couples, individuals, partnerships and corporations. Filing for Chapter 7 case is allowed if you are a person who owns a business or property in or resides in the United States.
Chapter 7 entails the complete liquidation of the debtor’s property to make payments to his creditors and also wipe out any remaining debts giving the debtor a fresh start. It is important for one to note that when you file for a Chapter 7 bankruptcy, it will remain on your credit report for a period of ten years, nevertheless if you strongly believe that filing for bankruptcy is necessary, your high debt has already affected your credit.
By filing Chapter 7 bankruptcy, one can be able to wipe out various kinds of debts, for instance medical bills or credits card debts. The filing process of Chapter 7 bankruptcy takes about three months and before filing for one is required to undergo a complete debtor education course with accredited agency for credit counseling.
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To get ready to read the information below with the right frame of mind, please first read How Do I Get Out of Debt Quickly? Change Your Mindset.
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Filing Bankruptcy Yourself
The filing process begins with an official petition and financial affairs statements in bankruptcy court and one must present full creditors list, their claim types as well as amounts, source of income, amount and frequency, full property list and monthly living expense detailed list.
Chapter 7 bankruptcy allows you to retain some assets but non-exempt assets may be sold by the trustee in order to pay back creditors. It is important for one to note that not all debts are discharged by filing Chapter 7 bankruptcy. You should find a local attorney and discuss what bankruptcy would mean for you in your situation.
Generally, spousal support, child support, less than three years back taxes as well as any court judgments are not discharged. Student loans can be discharged only when the debtor has the ability of showing extreme hardship which usually is difficult to prove.
The rules for filing for bankruptcy vary depending on the case type one intends to file. However, with the change of bankruptcy laws in 2005, qualifying to file for Chapter 7 bankruptcy has been more cumbersome for consumers. The intended goal of this change led by creditors was to ensure that filing for Chapter 7 bankruptcy was not done by individuals who are able to repay their debts.
For one to be eligible to file for Chapter 7 bankruptcy, the means test is used as a standard measure where an individual’s income is compared to the standard income for your respective state and if the average income of the debtor exceeds median income for your state’s family size, then application of the means test is required.
Application of the means test is done by comparing presumed expenses like healthcare, living expenses and education from the average income of the debtor. Depending on the remaining amount in case there is any, then one will either be eligible for to file for a Chapter 7 case.
For instance, if your income is lower than your state’s family size median income, then you are a qualified candidate but if your income is higher, then Chapter 13 bankruptcy can be your option which enables you to pay a portion of your debt with time using your disposable income. There are other ways to qualify for a chapter 7 bankruptcy than just on income alone. You should discuss this with your chapter 7 bankruptcy attorney.
The trustee or creditors also may try to find revocation for discharge or object to discharge but this is uncommon. Grounds to revoke or deny discharge may include fraud, failure of property disclosure or in case false information was given during your case.