Chapter 7 bankruptcy is the most sought after type of bankruptcy among filers in this country. Also known as “straight bankruptcy,” this type of filing allows you the opportunity to start fresh with a clean slate. But how does that work?
Chapter 7 entails the debtor giving up all “non exempt assets”--as deemed by federal and state bankruptcy laws—to the trustee for liquidation. The trustee takes the funds resulting from the liquidation and pays off the debtor’s creditors starting with secured creditors and working their way down. At the end of the 4-6 month process, all remaining balance on outstanding debts are discharged with the exception of the following:
• Child support and alimony debts
• Back taxes less than three years old
• Recent purchases of a significant amount
• Student loans
• Property executed contracts including liens or titles
NOTE: Because Chapter 7 bankruptcy is much more preferable than Chapter 13 in the eyes of American consumers, recent bankruptcy laws have made Chapter 7 bankruptcy much more stringent. Now Chapter 7 applicants must prove they lack the necessary income for Chapter 13 by submitting to a “means test.”
Who Should Consider Chapter 7?
If you are completely smothered in debt with no hope of getting out yourself then Chapter 7 might be for you. You should also have no co-signers involved, have very limited or no income, and be fearing action from your creditors in the form of lawsuits.
If this describes you then it is time to talk to a bankruptcy attorney in your area today. It is important to stay local because bankruptcy laws change from state-to-state and you will want an attorney who is well versed in your state’s bankruptcy laws. That way you can have the best possible opportunity at getting back on your feet.
