Chapter 7 Bankruptcy Overview – How It Can Eliminate Your Debt?

by Dori Tery on December 1, 2013

What You Need To Know About Chapter 7 Bankruptcy

Chapter 7 bankruptcy is known by several other common terms including debt liquidation and straight bankruptcy. It is one of the quickest and easiest types of bankruptcy, and in most cases the process can be completed within 6 months.

When a debtor wants to file for this type of bankruptcy they will have the opportunity to be relieved of their debt that is considered unsecured. The types of debt that fall into this category include:

  • Credit cards
  • Medical bills
  • Utility bills
  • Loans (Personal)

However, there are several types of debt that do not fall under this provision when a person files for Chapter 7 bankruptcy. These debts include:

  • Child support
  • Alimony
  • Student loans
  • Restitution
  • Fines ordered by a court

How Does The Process Begin?

A debtor that wants to file for this chapter of bankruptcy must first qualify. This qualification is granted when the debtor passes a ‘test’. This test compares your average income for your family to the average income for your particular state. If your income does not meet this minimal level then you will qualify and can begin filing for bankruptcy immediately.

If it is determined that your income is above the median income for the state, your attorney will need to recalculate the figure and take into consideration any deductions that can be applied to your case. A debtor that still has an income that exceeds the average income will be advised to file for a different type of bankruptcy. Most debtors with this situation can usually file for Chapter 13. Chapter 13 helps a debtor reorganize their expenses and the debts that they owe.

For debtors who qualify to file for Chapter 7 Bankruptcy, their attorney will need to file paperwork in their local area. Once the paperwork has been filed with the bankruptcy court the debtor will have to provide several additional forms of paperwork including:

• A financial affairs statement
• A list of their assets
• Their current income
• Their current expenses
• A copy of their most current tax returns

Chapter 7 Bankruptcy Credit Counseling Requirement

The other requirement that a debtor must comply with is that they must complete a credit counseling course. This course does not cost a lot of money and in many states the course can be completed online. The course can be completed in a day, and the fee for the course must be paid when the paperwork for Chapter 7 bankruptcy has been filed.

Course costs can vary by state and there is an administrative fee that must also be paid when the paperwork has been filed. If you cannot afford to pay the entire amount at the time of filing you can request a payment plan. Debtors should be aware that if they fail to make payments on time their bankruptcy case may be dismissed by the court system.

After a petition for bankruptcy has been filed on a debtor’s behalf, this usually places an automatic stop on any collection attempts. As long as the stop is in place creditors will not be able to seize garnishments from pay, retrieve property or even call the debtor in an attempt to collect money.

Chapter 7 bankruptcy will allow you to start over with a clean credit slate. You will also have the chance to devise a sound budget.

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Watch The Video Below – What Is Chapter 7 Bankruptcy Means Test?

Watch The Video Below – How To Fill Chapter 7 Bankruptcy Forms?

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