Important Points About Chapter 7 Bankruptcy

When liquidating your assets is the only option

When debts spiral out of control, spending sleepless nights become a common phenomenon. While some debtors try their luck in getting help from the debt relief options like debt consolidation, debt management and debt settlement companies, some others usually surrender to bankruptcy as they don’t feel that there’s any hope left for them to rejuvenate their finances. The two most common forms of bankruptcy are Chapter 13 and Chapter 7 bankruptcy. While the former allows you to repay your debts through an alternate repayment schedule, the latter entirely deals with liquidation of assets. If you’re someone who wants to file Chapter 7 bankruptcy but isn’t aware of the details of the entire process, you may boost your knowledge by going through the concerns of this article.

Who can file Chapter 7?

If you have already received a bankruptcy discharge within the last 6-8 years, you won’t be able to file under Chapter 7. Another situation when you can’t file Chapter 7 bankruptcy is when you can repay a portion of your debts, based on your income, expenses and total debt burden, through a Chapter 13 bankruptcy plan. You have to pass the Means test, as per the changes to the Bankruptcy Code. In short, you have to seriously go through extreme financial hardship in order to qualify for a Chapter 7 bankruptcy. Patel law firm offers competitive pricing on all Chapter 7 cases, click here to learn more

Automatic Stay – The magic wand of any form of bankruptcy

Irrespective of whether you file Chapter 7 or Chapter 13 bankruptcy, filing for bankruptcy puts you into an “Order of Relief” which is legally known as Automatic Stay. Most of your creditors, lenders and debt collectors have to stop collecting any form of debt that you owe them. Hence, though temporarily, the lenders can’t legally grab your wages, run over your house, seize your property or empty your bank account without your notice. You can therefore feel safe enough while you work with the court to repay your debts.

The bankruptcy trustee – The primary duty of the court-appointed person

So how does the court exercise its control over the entire situation of your filing Chapter 7 bankruptcy? He will appoint a bankruptcy trustee whose duty will be to see that your creditors are paid what you actually owe them. The more is the number of assets that the trustee recovers for the creditors, the more will be his pay. He will also check your papers and make sure they’re complete and accurate.

What exactly happens to your property – Are they liquidated?

After the scheduled creditors meeting, the trustee will probably determine that you’ve got some non-exempt property and you might initially be asked to either surrender the property or offer the trustee with the equal value with cash. If the property is not worth much or of the trustee sees that it would be troublesome for him to sell it off, he may even abandon the property, which means that you get an opportunity to keep it. This is most often the case when an individual has worked with an experienced Bankruptcy attorney who knows how to properly protect your assets. If you have a pledged property signed as collateral to a loan, this is treated as secured debt. When you’re current on the payments on this loan, the court might ask you to keep the property and continue making payments.

Once the bankruptcy process ends, all your debts will be wiped off and eliminated by the court except a few. Debts such as child support, student loans, tax debts are some that automatically survive Chapter 7 bankruptcy. So, if you’re about to file Chapter 7 bankruptcy, make sure you know the ins and outs of the process.