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Filing Chapter 7 Bankruptcy
Overview of filing chapter 7 bankruptcy, including qualifying for chapter 7, the bankruptcy process and the benefits of chapter 7 for those in debt.
January 29, 2012 /Law and Legal PR News/ -- Filing Chapter 7 Bankruptcy
Chapter 7 bankruptcy is often called "liquidation bankruptcy" because the trustee in the bankruptcy case gathers all of the debtor's non-exempt assets and liquidates them to pay off the debtor's creditors. The debtor does not have a repayment plan under Chapter 7. At the end of the process, the debtor receives a discharge from all personal liability for the debt that remains after the asset liquidation. Because Chapter 7 bankruptcy is such a powerful debt relief mechanism, Congress amended the bankruptcy laws in 2005 to limit Chapter 7 bankruptcy filings to those who are in severe financial straits by instituting stricter qualification testing for filing. However, Chapter 7 offers important benefits to those who qualify.
Qualifying for Chapter 7
First, people considering filing Chapter 7 bankruptcy need to determine whether they pass the Chapter 7 "means test." In general, the debtor cannot earn more than the state's median monthly income to qualify for Chapter 7. However, if a debtor has a great deal of debt compared to his or her income, the debtor may still qualify for Chapter 7.
Another factor to consider when thinking of filing for Chapter 7 is that if a person has filed for Chapter 7 within eight years previous to the petition, the debtor will not receive the debt discharge at the end of the bankruptcy process, which means that he or she will still be liable for some of the debt.
Filing Bankruptcy
To begin the bankruptcy process, a person needs to complete pre-filing credit counseling from an approved agency. Then a person files a bankruptcy petition with the court. When a person files the petition, he or she needs to supply the court with information about his or her finances such as:
-All of the filer's creditors and the amount owed
-The filer's monthly income and expenses
-A list of all the filer's property
After filing the petition, the debtor meets with creditors and the trustee to discuss the debtor's finances. The trustee and the creditors then determine priority of repaying the creditors.
The final part of the bankruptcy process requires the debtor to complete a debtor education course, then the court will issue the debt discharge.
Benefits of Chapter 7
One of the biggest benefits of filing chapter 7 is the automatic stay that bankruptcy puts on most collection actions. Creditors may no longer call and harass debtors for payment, mortgage lenders may not foreclose and utility companies may not stop services.
The other major benefit to filing bankruptcy is the debt discharge at the end of the process, releasing the debtor from personal liability for debt. Creditors may not sue for judgments for things like credit card debt, unpaid medical bills or mortgage deficiencies after foreclosures.
Filing Chapter 7 bankruptcy can be complicated, as a number of variables affect the process. If you are thinking of filing, consult an experienced bankruptcy attorney who can discuss all of your options with you.
Article provided by Law Offices of Benjamin J. Ginter
Visit us at www.ginterlaw.com
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