What is Chapter 7 Bankruptcy?
Many people have heard of Chapter 7 Bankruptcy, but are a bit in the dark regarding it’s exact definition. Chapter 7 bankruptcy is what’s known as a liquidation proceeding, where the debtor’s “non-exempt” assets are sold by the Chapter 7 trustee and the proceeds of those assets are then distributed to creditors according to the “priorities” established in the Code.
How to File for Chapter 7 Bankruptcy
In order for an individual to be eligible to file Chapter 7, their case must be determined by the “means test” in place. For the majority of consumer cases, all assets are typically exempt, therefore, there are no assets to liquidate—leaving creditors without a dividend. In general, Chapter 7 is the simplest and quickest form of bankruptcy. It usually is appropriate for individuals, married couples, corporations, and partnerships. The process begins with filing the official petition. This involves scheduling and providing a statement of financial affairs. The forms require the individual to disclose all of their assets as well as all of their debts. In addition, the individual must also hand over some recent financial history.
Undoubtedly, this process is the most draining, time-consuming reality when filing for Chapter 7. Revealing this information to anyone can be hard for certain individuals. There is a sense of vulnerability involved surely, revealing everything you’re worth and disclosing just how deep in debt you are can be troublesome thought. The most painful truth attached this process is coping with the notion that all the property that an individual owns that is not exempt will be sold by the bankruptcy trustee. Also, it is very possible to lose some luxury items as a result of filing for Chapter 7.
On top of this, certain categories of debts cannot and will not be discharged through Chapter 7 bankruptcy. This prompts the question, what reason do you have to file for Chapter 7 bankruptcy if you are aiming to eliminate these exact non-dischargeable debts?
People often wonder which debts are non-dischargeable, and not resolved by filing for Chapter 7 bankruptcy.
- Student loans, unless repayment would cause you too strong a financial strain
- Income taxes less than three years past due
- Back child support or alimony
- Court judgments for injuries or death to someone due to your intoxicated driving
- Recent debts for luxuries, and cash advances of over $925 within 70 days before you file for Chapter 7
Frankly, your particular debt may not be dischargeable when you file Chapter 7, what’s worse you stand to lose a lot of what you hold in your possession potentially. Avoiding Chapter 7 is preferable for many candidates. Choosing debt management and debt settlement can offer you a more stable plan, bring your debt down to size. The misguided affinity some people have for Chapter 7 bankruptcy is quite puzzling when you look at the cold hard facts regarding its consequences. Some people’s misconception of bankruptcy is manifests from what they hear through television, or social media, but often times are lacking in the pertinent knowledge necessary to determine whether or not Chapter 7 is worth the struggle.