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Chapter 7
Introduction
The purpose of chapter 7 bankruptcy is to offer debtors an opportunity to start over by canceling their debts. This cancellation of debts usually involves the liquidation of a debtor’s nonexempt assets to pay back their creditors. Nonexempt assets are determined by each state; therefore, it is important to talk to an experienced bankruptcy attorney to help you understand exactly how a chapter 7 bankruptcy will affect you.It is also important to be aware that not all debts will be discharged when you file for chapter 7 bankruptcy. Certain debts such as child support, alimony, certain taxes, criminal fines and/or restitution may not be discharged under chapter 7. An experienced attorney should be able to help you understand what debt you will still retain when you file for bankruptcy under chapter 7.
Chapter 7 Eligibility
A chapter 7 discharge is available to individuals, but not business entities such as partnerships and corporations. To be eligible for chapter 7 bankruptcy, an individual must pass a means test. The means test allows the bankruptcy court to determine whether or not you have the financial means to pay back your debt. If it is determined that you do not have the means to pay back your debt, you may be eligible for chapter 7 bankruptcy.The means test is a complicated tool specific to each state and has a series of steps to determine your eligibility for chapter 7 bankruptcy. For this reason, it is a good idea to consult a bankruptcy attorney that can help you determine your eligibility for chapter 7 bankruptcy. An individual must also receive credit counseling from an approved credit counseling agency before filing bankruptcy. With limited exceptions, the law requires that all individual debtors who file for bankruptcy relief receive credit counseling with an approved agency prior to filing bankruptcy. This briefing must be done within 6 months of filing for bankruptcy. In addition, after filing a bankruptcy case, an individual debtor generally must complete a financial management course before he or she can receive a discharge.
How Chapter 7 Works
A case for chapter 7 begins when an individual files a petition with the bankruptcy court where he or she lives. Along with this petition, an individual filing chapter 7 bankruptcy must also provide the court with schedules of assets and liabilities, a schedule of current income and expenditures, a schedule of executory contracts and unexpired leases, a statement of financial affairs, a certificate of credit counseling, a copy the most recent tax returns filed by the debtor and additional paperwork your attorney can discuss with you. A husband and wife may choose to file joint or individual bankruptcy petitions under chapter 7.When you file chapter 7 bankruptcy, most collection actions must stop. This means that your creditors may not file lawsuits against you, garnish your wages, pursue foreclosures or seek repossessions during the term of your bankruptcy. The bankruptcy clerk will notify all the creditors you specified in your bankruptcy petition that they are to stop any and all collection actions against you.
When you file for chapter 7, a trustee will be appointed to your case. The trustee will work to evaluate your case, make sure you understand the effects of filing for chapter 7 bankruptcy and then liquidate your nonexempt assets to pay back your creditors. Any money received through the liquidation of your property will be divided amongst your creditors in the order determined by your state. If you do not have nonexempt assets, your creditors will not receive any compensation for the debt you owe them.
Filing chapter 7 bankruptcy is a complicated process that demands the assistance of an expert. A bankruptcy attorney should be able to assist you in gathering all the necessary paperwork, understanding how filing chapter 7 will impact your life and filing your bankruptcy claim. Always consult a qualified bankruptcy attorney before filing for bankruptcy—they may be able to assist you in avoiding costly mistakes.