Chapter 7 Bankruptcy Information: Your Clean Start
It’s usually unclear to people exactly what options are open to them when they are considering Chapter 7 bankruptcy, which is why a little Chapter 7 bankruptcy information can go a long way. The economy has been very tough on a lot of Americans lately, and the recent changes to bankruptcy laws in 2005 has left many wondering exactly what Chapter 7 means. Chapter 7 is, if a filing is successful, the best way to get clear your debt. Please keep in mind though, that any decisions about the matter should be made in consultation with a bankruptcy lawyer.
A Chapter 7 bankruptcy is one way of getting clear of insurmountable debts. With a Chapter 7 filing, all property not exempted under federal or state law is subject to liquidation. Those assets are sold to reimburse creditors, and then the remainder of the debts is erased. Under Chapter 7, debtors do not have to repay their creditors under a repayment plan beyond what occurs in the liquidation phase.
There are only two initial requirements to file a Chapter 7 claim. The first is that the debtor, whether it is an individual or a business entity, meet with a credit counselor up to 180 days before the claim is filed. The debtors record must also be clear of malfeasance with the bankruptcy court system for 180 days or more, otherwise they may be disqualified. Not taken into consideration are the amounts owed by the debtor(s), nor their financial solvency. In other words, Chapter 7 does not require that someone be destitute to qualify for a clean debt slate.
Of course, the court system isn’t about to let someone clear their debts if they are clearly capable of paying them but refusing to do so. Thus, the federal government developed a ’means test’ to figure out whether or not someone is trying to abuse the system with his or her 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.
A Chapter 13 claim is very different from a chapter 7 claim. Under Chapter 13, a debtor is placed under a five-year repayment plan to his creditors. The amount left over after that period is dismissed under Chapter 7, and no property is liquidated.
Since the exemptions to what is liquidated under Chapter 7 don’t include very much at all, those debtors wishing to keep the majority of the property that either has a lien on it or is the cause of debt would probably seek an alternative route to repayment. Likewise, Chapter 7 probably isn’t right for those who wish to keep their business going. Another alternative, of course, is coming up with a repayment plan outside of court and avoiding the fees of filing for bankruptcy.
Whatever a debtor ultimately decides to do, with the Chapter 7 bankruptcy information that is evident, their finances are going to be critiqued heavily. The court system, including Chapter 7 filings, is only meant to benefit trustworthy debtors who want a fresh start.
Find out How To File For Bankruptcy.Anyone in serious financial trouble must definitely consider seeing a lawyer that specializes in bankruptcy law. Find out more details about Chapter 7 Bankruptcy Information and who can apply for it?
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