Filing for bankruptcy can be a tough decision but sometimes it can be the only way you can achieve financial peace. Bankruptcy can also enable you to start your life afresh and leave you with valuable lessons that you can use in your future endeavors. There are many types of bankruptcies you can file for depending on what suits your circumstances. One of the quickest ways of getting rid of debt is chapter 7 bankruptcy. Filing for bankruptcy can help you quickly get rid of overwhelming debt. Hiring a bankruptcy lawyer during the process is advisable. The guidance of a bankruptcy attorney simplifies the process for you and helps you safeguard your interests and rights in court.
Chapter 7 bankruptcy works on the principle of liquidation. Unlike chapter 13 bankruptcy, the debtor is not required to submit a repayment plan. Instead, the debtor needs to hand over their non-exempted assets to a bankruptcy trustee who sells them and uses the proceeds of the sales to pay creditors in accordance with the bankruptcy code. Therefore, debtors should be wary that they would be required to give up their assets when filing for Chapter 7 bankruptcy.
Chapter 7 bankruptcy wipes off unsecured debts such as medical bills, credit card bills, and personal loans. However, some forms of debts such as student loans, alimony, child support, back taxes, and court judgments are not eligible for a waiver under this category of bankruptcy. Additionally, filing of chapter 7 bankruptcy negatively impacts the debtor’s credit report.
Debtors qualifying the following criteria are eligible for filing chapter 7 bankruptcy:
The filing of chapter 7 bankruptcy and its completion takes six months. The process involves the following steps:
The debtor is required to complete credit counseling from an EOUST-approved agency 180 days before filing the chapter 7 bankruptcy petition.
Chapter 7 bankruptcy begins once a debtor files a petition. While filing the petition, the debtor is required to submit the following documents:
Filing the petition automatically initiates a stay or stop against creditor collection efforts.
Once the petition is filed and all the necessary documents are submitted, a trustee is appointed by the court who takes charge of managing the case. The trustee is responsible for administering the case and liquidate the non-exempted assets for disbursing the debt to the creditors
Once a trustee is appointed, he calls for a meeting of the creditors with the debtor. The meeting is held to discuss the debtor’s finances and bankruptcy forms. Creditors may use this as an opportunity to counter the debtor’s bankruptcy claims and voice any problems they may have with the plan. Additionally, the trustee questions debtors whether they are aware of the consequences of seeking a discharge under chapter 7 bankruptcy.
The trustee handles the responsibility of selling the debtor’s assets and disburses the proceeds to the creditors. The trustee in charge determines whether the assets are worth selling. Non-exempt proceeds can be anything from jewelry to equity. Typically, most chapter 7 bankruptcy cases are no-asset cases where there are no non-exempt assets to liquidate.
The debtors may be ordered to pay off their secured debts by handing over the property or asset held as collateral. If the debtor wants to retain the property, they can do so by paying the creditor the current value of the collateral or reaffirming the debt. This can be done by excluding the debt from bankruptcy.
Before the case is discharged, a debtor mandatorily needs to undergo a financial planning course. The debtor needs to complete the course under an EOUST-approved credit agency.
Bankruptcy discharge begins three to six months after the filing of the petition. After the debts are settled and the other eligible debts are forgiven, the case is closed.
You should opt for chapter 7 bankruptcy if:
Hiring a chapter 7 bankruptcy attorney can help you in the following ways:
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