25 Years of Experience
Chapter 7 Bankruptcy is the most common form of bankruptcy filed by individual debtors. Chapter 7 Bankruptcy is a liquidation proceeding designed for those experiencing financial difficulty that do not have the ability to pay their existing debts. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. In the vast majority of cases the debtor keeps all of his property because the debtor has no non-exempt assets for the trustee to distribute. This is called a "no asset case". Soon thereafter the debtor will receives a "discharge" of all dischargeable debts, providing the debtor with a "fresh start". Chapter 7 Bankruptcy is a viable option for most individuals that seek it.
A Chapter 7 bankruptcy will get rid of your debt, which means that you are free from the stress of dealing with debt collectors. A bankruptcy probably will remain on your credit report for 7 years, but, your debts, missed payments, and other defaults would also negatively impact your credit rating anyway. The difference is that you are a better credit risk after filing bankruptcy because those that loan you money in future will know that you can't file for Bankruptcy again for 8 years and receive a discharge. Filing for bankruptcy actually is a solid decision, and allows you to get started all over again, instead of simply delaying the inevitable. People that file for bankruptcy often find that the decision to file was most difficult, and also the most sensible decision they ever made.
A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the district where the individual lives or the business is located. In addition to the petition, the debtor must also file with the court a schedules of assets and liabilities, a schedule of current income and expenditures, a statement of financial affairs and a schedule of executory contracts and unexpired leases. Debtors must also submit a copy of their most recent tax returns to the trustee assigned to the case. Individual debtors with that have primarily consumer debts also have to file a certificate of credit counseling, and paycheck stubs for the last 60 days. Married people that want to file together can file a joint petition.
The Bankruptcy Code allows individual debtors that file Chapter 7 to protect certain property from from being liquidated to pay the claims of creditors. Depending on the State, debtors may have a choice between taking the Federal Exemptions or The Exemptions under the laws of the debtor's home state, but not both. Non-Exempt may be sold by the Trustee to pay creditors.
Usually within 30 days from the filing of the petition, the debtor has to appear before the Trustee to be asked questions about the petition under oath. If any Creditors appear at the meeting, they are free to ask the debtor questions as well. If the questions have been answered to the trusties satisfaction he will close the meeting and the debtor will be free to go, if not, the debtor may have to return on another day to answer more questions. Sometimes the US Trustee will also appear in cases where the debtor(s) income is close to the means test cut off, or in complicated cases where the US Trustee feels clarification is needed to understand whether the debtor(s) are abusing the system.
If all goes well the process takes about three (3) months from the time the petition is filed until the debtor receives the discharge in the mail. Once a debtor receives the discharge, they are no longer personally liable for any debts, unless of course, some of the debts are non-dischargeable. All consumer debtor's are required to complete the Financial Management training class before they are discharged.
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