Chapter 7 Bankruptcy Information: Learn About A New Start
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Complete liquidation and a fresh start is an attractive option to many debtors, so some Chapter 7 Bankruptcy can help people suffering the worst from unfortunate financial circumstances get back on their feet. The ins and outs of Chapter 7 bankruptcy information are much clearer than whether or not it's a good choice for those debtors investigating it. Anyone considering Chapter 7 should consult a lawyer to help them through the process. It isn't cheap, but lawyers can prevent a lot of trouble.
Chapter 7 Bankruptcy is the complete liquidation of all property not subject to a list of State-determined or federally determined exemptions. This property is sold to reimburse, in part at least, the creditors that the debtor owes money to. There is no repayment plan under Chapter 7; the debts are simply discharged. Applying for this type of bankruptcy is the equivalent of a fresh start, debt-wise.
As for eligibility, any individual or business entity (including partnerships, corporations, and others) can apply for Chapter 7. Anyone filing for Chapter 7 must have applied for credit counseling at an approved agency (check with a lawyer or the agency itself) up to 180 days before filing. Also, if the debtor has failed to appear at their scheduled bankruptcy hearing or otherwise irked the court 180 days before filing for Chapter 7, they are disqualified. The amount owed to creditors isn't taken into consideration by the courts, nor does the ability of the individual or business to pay debts at all factor inherently limit filing for this type of bankruptcy.
However, there are checks to make sure that people aren't simply abusing the system to get out of paying their debts. The courts have what is called a means test to determine whether or not someone is filing a so-called abusive petition.
A means test will examine a debtor's income and their expenses to determine whether the claim is abusive. The debtor's average monthly income for the past five years is compared to the median amount for the state that they live in. If it is above that amount, the bankruptcy claim will be subject to the second test, which investigates the expenses of that debtor in comparison to the amount of unsecured debt that they own. So if those expenses exceed 25 percent of the debt not secured by collateral usually something like credit card debt then the court will either turn the case into a Chapter 13 filing or simply dismiss the whole thing.
Filing a Chapter 13 bankruptcy has very different consequences. Under Chapter 13, the government helps set up a payment plan through which the debtor pays his creditor over the course of five years the maximum he or she is capable of, while still allowing for federally determined living expenses like rent, food, etc. The amount that cannot be paid after that period is erased.
However, Chapter 7 is not right for everyone considering filing for bankruptcy. If a debtor wants to keep their collateral or the object of their debt, whether it be their house, car, or business, the safest way to do so is to pursue routes without liquidation. One alternative besides Chapter 13 bankruptcy settling with creditors without the court system.
Armed with Chapter 7 Bankruptcy information, it's clear that your finances are going to be subject to intense scrutiny by the bankruptcy process. This is so that Chapter 7 can do exactly what it is meant to do: provide a means by which honest debtors can get their lives back on track.
Chapter 7 Bankruptcy is the complete liquidation of all property not subject to a list of State-determined or federally determined exemptions. This property is sold to reimburse, in part at least, the creditors that the debtor owes money to. There is no repayment plan under Chapter 7; the debts are simply discharged. Applying for this type of bankruptcy is the equivalent of a fresh start, debt-wise.
As for eligibility, any individual or business entity (including partnerships, corporations, and others) can apply for Chapter 7. Anyone filing for Chapter 7 must have applied for credit counseling at an approved agency (check with a lawyer or the agency itself) up to 180 days before filing. Also, if the debtor has failed to appear at their scheduled bankruptcy hearing or otherwise irked the court 180 days before filing for Chapter 7, they are disqualified. The amount owed to creditors isn't taken into consideration by the courts, nor does the ability of the individual or business to pay debts at all factor inherently limit filing for this type of bankruptcy.
However, there are checks to make sure that people aren't simply abusing the system to get out of paying their debts. The courts have what is called a means test to determine whether or not someone is filing a so-called abusive petition.
A means test will examine a debtor's income and their expenses to determine whether the claim is abusive. The debtor's average monthly income for the past five years is compared to the median amount for the state that they live in. If it is above that amount, the bankruptcy claim will be subject to the second test, which investigates the expenses of that debtor in comparison to the amount of unsecured debt that they own. So if those expenses exceed 25 percent of the debt not secured by collateral usually something like credit card debt then the court will either turn the case into a Chapter 13 filing or simply dismiss the whole thing.
Filing a Chapter 13 bankruptcy has very different consequences. Under Chapter 13, the government helps set up a payment plan through which the debtor pays his creditor over the course of five years the maximum he or she is capable of, while still allowing for federally determined living expenses like rent, food, etc. The amount that cannot be paid after that period is erased.
However, Chapter 7 is not right for everyone considering filing for bankruptcy. If a debtor wants to keep their collateral or the object of their debt, whether it be their house, car, or business, the safest way to do so is to pursue routes without liquidation. One alternative besides Chapter 13 bankruptcy settling with creditors without the court system.
Armed with Chapter 7 Bankruptcy information, it's clear that your finances are going to be subject to intense scrutiny by the bankruptcy process. This is so that Chapter 7 can do exactly what it is meant to do: provide a means by which honest debtors can get their lives back on track.
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Anyone in serious financial trouble must certainly consider seeing a lawyer that specializes in bankruptcy law. That being said, what does Chapter 7 Bankruptcy Information and Chapter 13 Bankruptcy Rules mean for debtors and who can apply for it?
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