A Guide On Chapter 7 Bankruptcy
Are you far behind on paying your debts? Do you lack the means to pay monthly bills and living expenses? If your answer to any of these questions is yes, your last resort may be to file for Chapter 7 bankruptcy. However, filing for bankruptcy is a delicate process that requires a proper understanding of the process. This post provides vital insights on Chapter 7 bankruptcy.
What Is Chapter 7 Bankruptcy?
A debtor may file for a Chapter 7 bankruptcy, also known as straight or liquidation bankruptcy. This type of bankruptcy wipes out particular debts for people who lack the means to pay all their bills. The process takes several months, and the debtor is not required to have a repayment plan. However, you must pass a means test to qualify and you also must sell non-exempt assets to pay off creditors.
Steps of the Chapter 7 Bankruptcy Process
Step 1: Counseling
The law requires individuals to undergo credit counseling before starting the process. Specifically, you must attend individual or group counseling sessions. However, you may get an exemption in some cases.
Step 2: Application Forms
The debtor completes and files several bankruptcy application forms with the court. These forms provide personal information on finances, income, assets, expenses, and creditors. The debtor gets an automatic stay immediately after filing the petition. The stay prevents creditors from collecting any debt and other parties from withholding your income.
Step 3: Trustee Appointment
Having received your application, the court appoints an independent trustee. The work of the trustee is to oversee the bankruptcy process. This professional reviews your assets and identifies the ones to liquidate and pay creditors. As part of the role, the trustee meets with the creditors to ascertain their claims and answer their queries.
Step 4: Debt Repayment
This step follows the reviews of debtors' assets and finances. Essentially, the trustee divides the assets into exempt and non-exempt properties. Eventually, the court seizes non-exempt property and liquidates it to pay creditors. However, the debtor cab retain exempt property such as a primary home and personal car to maintain basic living standards.
Step 5: Discharge of Remaining Debt
The court then discharges any remaining debt after the liquidation of non-exempt assets. As such, the court releases the debtors from any personal liability to pay. Consequently, the creditors cannot seek future settlement from the debtor. However, the court does not discharge certain obligations like alimony, child support, income taxes, and student loans.
Chapter 7 bankruptcy can release you from your obligations to pay certain debts. Engage a bankruptcy attorney to guide you through the process and increase your chances of success.