Chapter 7 is one of the choices for individuals who wish to declare Bankruptcy. Note though that Chapter 7 is not perfect and will not sweep away all debts under the rug. In order to ensure fairness in availing Chapter 7 Bankruptcy, the law imposes several rules and regulations to make sure those who are granted this privilege are only those who deserve it.
How Does Chapter 7 Work?
In its strictest sense, a Chapter 7 Bankruptcy grant gives you the chance to: (1) sell off all your assets as provided by law and (2) use the proceeds to pay off any outstanding debts. The beauty of this approach is that you’re not obliged to pay ALL your debts. The law makes it possible for you to pay only in so far as the amount of assets you have. Hence, when you’re no longer capable of making payments, any remaining debt is discharged and you’ll have the chance to build your financial empire back again.
Here’s what you should know about Chapter 7:
- There are qualifications when petitioning for a Chapter 7 Bankruptcy. A Means Test is often employed wherein a computation determines if your disposable income is no longer sufficient to cover your monthly payments and ongoing debts;
- Chapter 7 forms and Means Tests are often available online, giving you a rough evaluation of your standing when it comes to Chapter 7 Bankruptcy. This makes it possible for you to determine whether or not your petition will be granted by the courts;
- Chapter 7 filing often comes with mandatory credit counseling. This is the court’s way of ascertaining that all possible financial solutions are explored before a bankruptcy petition can be considered;
- Under Chapter 7, you are allowed to keep some of your assets for the purpose of day to day living;
- Understand that there are disqualifications for Chapter 7 application. For example, if you’ve been granted a bankruptcy discharge within a specific period of time, then you cannot apply for another one until that length of time has passed;
- Bankruptcy petitions are an arduous process and would necessitate multiple visits with the judiciary. The burden of proof rests on the petitioner to prove that their resources are no longer sufficient to meet expenses.
As previously mentioned, Chapter 7 doesn’t allow you to discharge all debts. Some types still need to be paid and will continue to accrue after judgment has been given. A good example of this would be payment for alimony or child support. Debts related to college education may also not be discharged. Fortunately, the Chapter 7 section provides an extensive enumeration of what debts you can and can’t discharge.
Filing for Chapter 7
It’s perfectly possible to file a Chapter 7 Bankruptcy petition yourself, especially if you managed to pass the Means Test as described in the first heading. Note though that from there on out, you’ll be required to fill in different forms and meet with creditors in a court-mandated setting to determine the validity of your claims. That being said, the presence of a bankruptcy lawyer may become helpful if not invaluable.