A debtor may petition for one of the numerous Chapters of bankruptcy, including Chapter 7, Chapter 13, Chapter 9, and Chapter 11. Depending on the criteria established by the US, a debtor or organization will decide which Chapter of bankruptcy to file. For instance, only private parties may apply for Chapter 13 bankruptcy. So, if a company files for bankruptcy, it will probably do so through a Chapter 11 case.
The most popular bankruptcy filing is Chapter 7. What’s Chapter 7 bankruptcy? It is perfect for borrowers with significant levels of unsecured debt and modest incomes who require a speedy type of relief. If a Chapter 7 bankruptcy filing is successful and a discharge is granted, the debtor will no longer be responsible for making payments on their obligations.
So, if you have a lot of debt from unpaid credit cards or medical bills, you might want to speak with a local bankruptcy lawyer to determine whether declaring Chapter 7 bankruptcy is the best course of action for you. Bankruptcy is frequently a last resort and has many repercussions. A bankruptcy lawyer can inform you of all the dangers and advantages involved.
Changes to Chapter 7 Bankruptcy Law
The Coronavirus Aid, Relief, and Economic Security Act (or “CARES Act”) was passed by Congress in March 2020 in reaction to the pandemic. Although providing immediate aid and healthcare to people affected by the pandemic is the major goal of this Act, it also made some substantial revisions to the rules of different federal bankruptcy laws.
The CARES Act specifically changed the concept of “current monthly income” as it applies to Chapter 7 bankruptcy cases. Individuals may now omit payments provided to them under the CARES Act within the term. In other words, a debtor won’t have to include the money as part of their income if they received payment as a result of a circumstance covered under the CARES Act.
This modification is essential for Chapter 7 bankruptcy filings. This is because it ensures that the means test, which once again establishes a debtor’s eligibility for filing for Chapter 7 bankruptcy, will not be affected by the amount they received as part of the CARES Act. As a result, a sum related to the CARES Act that might have raised a debtor’s eligibility for Chapter 7 won’t do so anymore, and the debtor will still be eligible.
Debtors must keep up with any changes in the United States Bankruptcy Code, like the one we just reviewed, as they can significantly impact how a bankruptcy file turns out. It may be much more beneficial to employ a lawyer whose job is keeping debtors informed rather than regularly examining the laws and attempting to make sense of all the legalese.
Chapter 7 bankruptcy attorneys must also keep up with changes to US law and new legislation. They can boost the likelihood of filing a successful bankruptcy petition and clarify any modifications made to the Bankruptcy Code.
How to File for Chapter 7 Bankruptcy
When filing for Chapter 7 bankruptcy, a person should first gather their financial records and create a list of all of their debts, assets, income, property, liabilities, and costs. They should also research the forms of debt that cannot be discharged during a bankruptcy procedure and the categories of property that are exempt from bankruptcy in their state.
After this is finished, a debtor must attend credit counseling sessions within 180 days of declaring bankruptcy, according to federal bankruptcy law. The debtor should be given a certificate of completion at the conclusion of counseling to attest that they fulfilled this obligation. A debtor’s petition for bankruptcy will be rejected outright by the court if they are unable to secure this certificate.
The debtor may submit a bankruptcy petition to a federal bankruptcy court once credit counseling is finished. If the court approves the petition, a court trustee will be appointed to handle the matter and set up a meeting of the creditors. At this meeting, the debtor is required to appear and respond to the trustee’s inquiries. Before a decision is made, the debtor must also take a second debtor education course.
The court will decide whether or not to issue a discharge order once all of the procedures mentioned above have been completed. A discharge order will shield debtors from further collection efforts and release them from their obligation to pay outstanding debts.
The Chapter 7 Bankruptcy Debt Discharge
A “discharge of debt” in a Chapter 7 bankruptcy filing occurs when the bankruptcy court issues an order. This order frees the debtor from having to repay their creditors and prevents the creditors from pursuing any unpaid obligations. Creditors are permitted to seize property and execute any liens affixed to secured obligations, but they are not permitted to litigate or harass a debtor over any discharged debts.
Although receiving a discharge order may seem like a relief, it can negatively affect a debtor’s credit score for up to 10 years. Additionally, not all debts are dischargeable, and not all debtors are eligible to pursue a discharge of their debt. The only debtors whose debts may be discharged are those who are qualified and meet all court conditions.
The following are not regarded as dischargeable debt:
- Federal student loans
- Child support
- Penalties or restitution for crimes
- Property and business taxes owed before the filing
- Court fees
- Retirement plan loans
The items that might not be discharged in a Chapter 7 bankruptcy filing are not all included here. Therefore, it could be a good idea to speak with a local bankruptcy attorney for further details regarding dischargeable debts.
How to File for Chapter 7 Bankruptcy Online
Bankruptcy Chapter 7 online filings are generally not advised. Filing for bankruptcy involves many exacting standards, steps, and perplexing legal restrictions. Chapter 7 filing fees typically cost $335. Reopening a case after an error is made will cost an extra $260 or more, depending on whether legal representation is required.
The procedures for submitting a Chapter 7 bankruptcy petition online are largely the same as those that must be completed in person at the court or with the assistance of a lawyer. In order to file for Chapter 7 bankruptcy, the person must be aware of how to perform the means test, assess their resources and assets, and be certain that Chapter 7 is the right Chapter of bankruptcy to file under.
Furthermore, not all states permit people to file for Chapter 7 bankruptcy without an attorney. In order to determine whether this service is even available in their state, a debtor must examine state legislation.
What Are the Effects and Advantages of Filing for Bankruptcy Under Chapter 7?
The following are a few benefits of filing Chapter 7 bankruptcy:
- Cancellation of a sizable portion of the debtor’s obligations
- Any collection actions or foreclosure procedures will be momentarily suspended.
- Allows for a “clean slate” in terms of finances
Do I Need a Lawyer for Chapter 7 Filing Assistance?
It might be challenging to file for bankruptcy under Chapter 7 laws. If you need assistance submitting a claim, you might choose to hire a competent bankruptcy attorney in your region.
Your lawyer can advise you of any other options and assist in determining if you qualify for bankruptcy. Additionally, your lawyer can help you with the procedure and answer any questions or concerns you may have.