It's usually unclear to people exactly what options are open to them when they are considering Chapter 7 bankruptcy, which is why a little Chapter 7 bankruptcy information can go a long way. The economy has been very tough on a lot of Americans lately, and the recent changes to bankruptcy laws in 2005 has left many wondering exactly what Chapter 7 means. Chapter 7 is, if a filing is successful, the best way to get clear your debt. Please keep in mind though, that any decisions about the matter should be made in consultation with a bankruptcy lawyer.
A Chapter 7 bankruptcy is one way of getting clear of insurmountable debts. With a Chapter 7 filing, all property not exempted under federal or state law is subject to liquidation. Those assets are sold to reimburse creditors, and then the remainder of the debts is erased. Under Chapter 7, debtors do not have to repay their creditors under a repayment plan beyond what occurs in the liquidation phase.
It doesn't matter how much a creditor is owed by a debtor or even whether the creditor can pay the debt back over an extended period of time. So long as the debtor has applied for counseling from an approved credit or financial service 180 days prior to their filing for Chapter 7 and hasn't been disrespectful of the courts proceedings in that same period, any corporation, individual, or partnership can apply for Chapter 7.
Of course, the court system isn't about to let someone clear their debts if they are clearly capable of paying them but refusing to do so. Thus, the federal government developed a 'means test' to figure out whether or not someone is trying to abuse the system with his or her petition.
The first part of the means test checks to see whether a debtor's monthly income is above the median for their state of residence. The second part involves a concept called unsecured debt, which means the type of debt that isn't secured by the creditor with debtors' assets. Mostly, this applies to credit card debt. If your expenses exceeds 25% of their unsecured debt, then the court presumes that the case is abusive and will probably dismiss it or convert it to a Chapter 13 bankruptcy filing.
Filing a Chapter 13 bankruptcy has very different consequences. Under Chapter 13, the government helps set up a payment plan through which the debtor pays his creditor over the course of five years the maximum he or she is capable of, while still allowing for federally determined living expenses like rent, food, etc. The amount that cannot be paid after that period is erased.
However, Chapter 7 is not right for everyone considering filing for bankruptcy. If a debtor wants to keep their collateral or the object of their debt, whether it be their house, car, or business, the safest way to do so is to pursue routes without liquidation. One alternative besides Chapter 13 bankruptcy settling with creditors without the court system.
Chapter 7 is currently designed to resist abuses and dishonesty, so debtors should make sure that they're providing all the necessary personal information and are honestly qualified for that kind of debt relief. Chapter 7 bankruptcy information can help determine whether or not to pursue that solution to a financial crisis.
A Chapter 7 bankruptcy is one way of getting clear of insurmountable debts. With a Chapter 7 filing, all property not exempted under federal or state law is subject to liquidation. Those assets are sold to reimburse creditors, and then the remainder of the debts is erased. Under Chapter 7, debtors do not have to repay their creditors under a repayment plan beyond what occurs in the liquidation phase.
It doesn't matter how much a creditor is owed by a debtor or even whether the creditor can pay the debt back over an extended period of time. So long as the debtor has applied for counseling from an approved credit or financial service 180 days prior to their filing for Chapter 7 and hasn't been disrespectful of the courts proceedings in that same period, any corporation, individual, or partnership can apply for Chapter 7.
Of course, the court system isn't about to let someone clear their debts if they are clearly capable of paying them but refusing to do so. Thus, the federal government developed a 'means test' to figure out whether or not someone is trying to abuse the system with his or her petition.
The first part of the means test checks to see whether a debtor's monthly income is above the median for their state of residence. The second part involves a concept called unsecured debt, which means the type of debt that isn't secured by the creditor with debtors' assets. Mostly, this applies to credit card debt. If your expenses exceeds 25% of their unsecured debt, then the court presumes that the case is abusive and will probably dismiss it or convert it to a Chapter 13 bankruptcy filing.
Filing a Chapter 13 bankruptcy has very different consequences. Under Chapter 13, the government helps set up a payment plan through which the debtor pays his creditor over the course of five years the maximum he or she is capable of, while still allowing for federally determined living expenses like rent, food, etc. The amount that cannot be paid after that period is erased.
However, Chapter 7 is not right for everyone considering filing for bankruptcy. If a debtor wants to keep their collateral or the object of their debt, whether it be their house, car, or business, the safest way to do so is to pursue routes without liquidation. One alternative besides Chapter 13 bankruptcy settling with creditors without the court system.
Chapter 7 is currently designed to resist abuses and dishonesty, so debtors should make sure that they're providing all the necessary personal information and are honestly qualified for that kind of debt relief. Chapter 7 bankruptcy information can help determine whether or not to pursue that solution to a financial crisis.
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