Chapter 7 Bankruptcy Law
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What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy mainly covers proceedings involving the discharge of a person’s debt. When filing for Chapter 7 bankruptcy, the person’s debts are forgiven or cancelled. This applies to most, but not all of, the person’s debt. Chapter 7 bankruptcy can therefore be an efficient way for a person to handle their debts.
What Are the Requirements to Filing for Chapter 7 Bankruptcy?
The requirements in filing for a Chapter 7 bankruptcy include:
- Submit Paperwork: You must submit the necessary paperwork. The paperwork should describe what property you own, your current income and monthly expenses, your debts, and any property you believe you should be able to keep after liquidation is over.
- Means Test: must complete a "means test," which determines your ability to pay your creditors, and therefore your eligibility to file Chapter 7. The means test compares your income to the state median income. If you pass the means test, you may continue in the process. If not, you should consider filing for Chapter 13 bankruptcy instead.
- Get Mandatory Credit Counseling: You must receive credit counseling during the six month period prior to filing a Chapter 7 bankruptcy. This requirement was added to the bankruptcy laws in 2005. This requirement is only for individuals who file bankruptcy. Business bankruptcies are not required to take credit counseling.
What Are the Effects of Filing Chapter 7 Bankruptcy?
Some of the positive effects of filing for Chapter 7 bankruptcy include:
- Cancellation of a significant amount of the person’s debts
- Temporary suspension of any collection proceedings or foreclosure processes
- Allows for a "clean slate", financially speaking
Some of the disadvantages of filing chapter 7 may include:
- Bankruptcy doesn’t discharge all forms of debt, such as student loans.
- The person may have to sell some of their assets and have the proceeds forwarded to creditors
- Chapter 7 can have negative effects on the person’s credit score
- Bankruptcy can often lead to other legal disputes, as all kinds of credit reports and other documents will be uncovered during the process. The entire process can involve many different parties and lenders.
- The person will need to wait 8 years until they are able to file for Chapter 7 again
Regarding this last point, a person should make sure that they want to file for Chapter 7 before they do so. Under Chapter 7 laws, they won’t be able to re-file under Chapter 7 until the required 8 years is up.
Are There Any Recent Changes to Chapter 7 Bankruptcy Filings?
There a few recent changes to Chapter 7 filings. The first involves different tests to determine whether the person has enough income to shift the case to Chapter 13. This involves somewhat complex calculations regarding the person’s disposable income compared with personal debts. The assistance of a lawyer may be needed when calculating these values.
Also, there are changes in the way property is valued in a Chapter 7 filing. Before 2005, property was valued according sales auction prices. After 2005, property is valued according to vendor prices. This often results in the more frequent sales of the person’s property to pay off creditors.
Do I Need a Lawyer for Help with Chapter 7 Filings?
Filing under Chapter 7 bankruptcy laws can often be confusing. You may wish to hire a qualified bankruptcy lawyer in your area if you need help filing a claim. Your attorney can help determine your eligibility for bankruptcy, and can also inform you of any alternative options. Also, your attorney can guide you through the process and assist you with any questions or concerns you might have.
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Last Modified: 08-20-2015 02:00 PM PDT
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