Process of Chapter 7 Bankruptcy
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What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, also known as "liquidated" bankruptcy, is the most common form of individual bankruptcy. Bankruptcy courts have adopted a standard process for managing these cases.
Are There Any Requirements to Filing for Chapter 7 Bankruptcy?
Before you can even file with the Bankruptcy court, there are a few tasks you need to complete. First, 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.
Second, you 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.
Finally, you are also required to undergo credit counseling.
What Happens After the Paperwork is Submitted?
Once you have completed these tasks, you can file with the Bankruptcy court. The bankruptcy judge will immediately issue an "automatic stay," which stops any collection actions against you. You are then required to submit paperwork indicating your assets, income, debts, tax returns, etc.
The Bankruptcy court will appoint a trustee to your case. A court trustee is an individual appointed by the court to handle the bankruptcy. About a month or so after filing, you meet with your trustee in order to answer questions about your assets and debts. Your creditors are invited to this meeting (in fact, this conference is known as the "meeting of creditors"). After the meeting, the trustee will sell off some of your property, and divide the proceeds among your creditors.
Finally, once your trustee has completed these tasks, the Bankruptcy court will schedule a final hearing. The judge will discharge any remaining debts that you have. You are now legally free of any debts, and your creditors are forbidden from trying to collect any money from you.
Should I Consult an Experienced Bankruptcy Lawyer?
It may be helpful to see a lawyer who has experience with bankruptcy issues and cases. The process for filing a Chapter 7 bankruptcy is complicated and a bankruptcy attorney can help guide you through it.
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Last Modified: 05-14-2014 01:34 PM PDT
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