Chapter 7 Bankruptcy
“Many people thinking of filing bankruptcy want to know what a Chapter 7 bankruptcy is. Chapter 7 is the most common bankruptcy chapter filed in America. Chapter 7 refers to the chapter of the Bankruptcy Code under Title 11 of the United States Code. Chapter 7, commonly known as “liquidation bankruptcy”, A Chapter 7 rarely involves the sale of a debtor’s non-exempt assets by a trustee. In the case where assets are obtained and then sold by the sale of a debtors assets through a bankruptcy trustee are then turned over to creditors.
Completing Bankruptcy Documents
When filing for Chapter 7 bankruptcy, it involves the completion of lots of complex documents. These documents are normally available as a packet from a bankruptcy court office for a fee. These documents include the voluntary petition for relief, the schedules of assets and liabilities, declarations regarding debtor education and the statement of financial affairs. These documents require a debtor to open up their financial life to the bankruptcy court, which includes a listing of all of his property, debts, creditors, income, expenses and property transfers, among other things. Upon the completion of all of the bankruptcy documents, a debtor must file the documents with the clerk of the bankruptcy court and pay a filing fee.
A debtor must also successfully pass the means test calculation, which is another document that must be completed prior to filing for bankruptcy. This test, which was added to the Bankruptcy Code in 2005, calculates whether you are able to afford, or have the “”means”” to pay your debts. The means test annualizes your income for the past six months and compares it with the median income for your place of residence. The means test also includes your secured debt in determining whether you can afford to pay for your debts. If you fail to pass the means test, you can only file Chapter 7 bankruptcy under very specialized exceptions. The means test has drawn criticism since its inception.
If the trustee, nor any creditor objects to the debtor’s discharge, the bankruptcy court will automatically give the debtor a discharge at some point after the last day to object. The last day to file a complaint objecting to a debtor’s discharge is 60 days after the first session of the Meeting of Creditors. If no complaint is filed, the discharge is usually entered several days later. The discharge prevents creditors from attempting to collect any debt against the debtor, personally, that arose prior to the filing of the bankruptcy. Thus, for all intents and purposes, the discharge effectively wipes out debts. However, it is important to note that not all debts are dischargeable, including, but not limited to certain taxes and child or spousal support obligations. Furthermore, a bankruptcy discharge is personal. This means that a creditor can still collect on a discharged debt from a co-debtor that did not file for bankruptcy.
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