Chapter 7 Bankruptcy

Liquidate – Chapter 7 Bankruptcy

Chapter7 Bankruptcy cancels all your debts. Yet you may also have to sell all your property.

Under the Chapter7 Bankruptcy, the court orders an appointed case trustee to take over your estate to be sold or ‘liquidated' at government auctions and from which the proceeds will go to all your creditors – then, you will be discharged, that is, after almost all your assets had been literally, wiped-off. No matter how bad it sounds, we should all admit that for the past decades, most people had been taking advantage of the debt-discharge to meet with their lavish activities bringing them into debt. Good enough, the new bankruptcy law limits those who can actually qualify to file the Chapter7 Bankruptcy.

Prospective Liquidation filers would need to undergo a more thorough evaluation called ‘Means Test', performed in order to identify their true ability to pay their debts. Under the new law, the Chapter7 Bankruptcy requires that the individuals opting for bankruptcy should have incomes lower than their state-mandated median family income. Failure to meet this condition would these debtors to have a repayment of some of their important debts (after revealing they actually can) instead of being completely relieved (‘discharged') from most or all of it. Also, individuals who had already previously filed for bankruptcy and was once discharged from it could not file a new bankruptcy case unless the previous case had already come to pass at least 6/8 years. Inability to meet these eligibility requirements would compel the debtor to file for a reorganization or repayment plan bankruptcy instead.

To meet the qualification, the debtor needs to present a certificate of a credit counseling course completion and then to accomplish a two-page petition and a number of other forms, and then file these with the bankruptcy court in his state for evaluation and creditors meeting. Basically, the forms ask about descriptions of the bankruptcy filer's property, current income and its sources, current monthly living expenses, the debts, and the (exempt) property he claims to be allowed by the law for him to keep all through the bankruptcy process. Most state bankruptcy courts also allows filers to keep equity in home, clothing, household furnishings, unspent Social Security payments, and other necessities such as a car and the tools of trade, property owned and money spent during the previous two years, and property sold or given away during the previous two years. The qualified bankrupt is then protected by an automatic stay as well as limited by it. Since he has already technically placed his property and the debts in the hands of the bankruptcy court, he can't sell or give away any of the property he owns or pay off his pre-filing debts without the court's consent.

At the end of the Chapter7 Bankruptcy process, all debts are discharged except debts that automatically survive bankruptcy as with creditor-secured debts, child support, student loans, and some tax debts, as well as court-declared creditor non-dischargeable debts due to debtor's fraud.