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Process of 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.
Before you can even file with the Bankruptcy court, there are a few tasks you need to complete. First, you must complete a “means test,” which determines your ability to pay your creditors, and therefore your eligibility to file Chapter 7. You are also required to undergo credit counseling.
Once you have completed these tasks, you can file with the Bankruptcy court. The bankruptcy judge will immediately issue a “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. 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”), but they rarely attend. 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.
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