Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is a solution for someone who had made a good effort to pay off debts, but due to unforeseen circumstances has become overwhelmed with the debt and needs help to get a fresh start.
Chapter 7 is a section in the bankruptcy code which allows for the liquidation of assets. This means that a debtor can sell his or her assets and use the proceeds to pay creditors. Before filing for Chapter 7 bankruptcy, the debtor must sit for a means test. This test was created to help prevent people from defrauding the bankruptcy system. The means test is used to determine that the debtor does not have any way to repay the creditor. If the debtor qualifies for Chapter 7 bankruptcy, then the process begins. If it is determined that the debtor has enough income to make minimal payments on the debt, he or she may be referred to Chapter 13 bankruptcy which allows for restructured payment.
The process for filing Chapter 7 bankruptcy is rather simple. There is a petition that must be filled out and filed with the court. On the petition, the debtor must list all of their creditors, and the amount of debt and nature of the debt. He or she must also list their source of income, amount of income, and how often they receive the income. And they must also provide a list of all property, as well as a detailed list of the monthly living expenses including food, shelter, transportation, medicine, etc. When the petition is filed with the court, the debtor must pay a total of $299 in fees. This includes a $245 filing fee, a $39 administrative fee, and a $15 trustee surcharge. If the debtor’s total income is more that 150% below the poverty level, the fees may be waived.
After the petition is filed and the fees are paid, the debtors are required to stop all collection attempts. The court makes the decision on the petition, at which time assets are liquidated, and outstanding debts are either paid or discharged. Once an a debtor has filed for Chapter 7 bankruptcy, that individual may not file again for eight years, and the bankruptcy is listed on your credit report for ten years.
The decision to file Chapter 7 bankruptcy is one that should be made only after careful consideration and evaluation of the debt to income ratio. If the debtor finds that he or she is unable to repay the debt and that there is no other viable solution, then the petition should be filed. It may seem like a drastic step, and it is, but it can help provide a fresh start, and a way to get out from the crushing burden of debt.
It is possible for the debtor to file for bankruptcy without a lawyer, but bankruptcy lawyers can help ensure that the proper paperwork and supporting information is submitted. Again, this is a decision that should be made by the debtor.