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It’s important to have a good understanding of bankruptcy before you file for it. Bankruptcy is, after all, a serious matter. There are a couple of different kinds of bankruptcy, so you need to distinguish between the two. To figure out which is most appropriate for your situation, you may want to speak to a professional about Chapter 7 verses Chapter 13 bankruptcy.
If you need to get out from under staggering debt, the bankruptcy protection provided by Chapter 7 may be exactly what you’ve been looking for. Here, information about Chapter 7 bankruptcy will be available.
Chapter 7 Bankruptcy Definition
Here’s an answer to the frequently asked question, “What is Chapter 7 bankruptcy?”
Chapter 7 bankruptcy is sometimes referred to as “liquidation bankruptcy”. This is because you will be selling all or most of your available assets. To pay off your creditors as much as possible, your non-exempt assets will be liquidated by a bankruptcy trustee. The remaining debt will be discharged after your proceeds are exhausted.
Chapter 7 Bankruptcy: Assets and Qualifications
As stated, you’ll need to sell off some of your assets to pay creditors before the rest of your debt can be discharged. But not all of your possessions need to be sold off because some are exempt.
Exempt items:
- Social Security
- Pensions
- Employment necessary tools
- Clothing
- Personal items
- Part of the equity in your automobile and in your home
- Various public benefits
Examples of non-exempt items (these should be liquidated before your bankruptcy goes through):
- Investment accounts
- Bank accounts
- Valuable items, collectibles, etc.
- Second vehicle (car, truck, etc.)
- Boats
- Recreational vehicles
- Property that is not your primary residence
Qualifications for Chapter 7:
- Applicant must pass a means test
- Applicant cannot have filed Chapter 7 in the last eight years
Who Gets Paid?
Paid first are unsecured priority debts. These could include the following:
- Personal injury claims (against the person filing for bankruptcy)
- Child support
- Tax debts, etc.
Paid next are secured debts.
Finally, unsecured, nonpriority debts are paid with any asset liquidation funds remaining. On a pro-rata basis, the rest of the debts are paid off.
The Four Steps of Chapter 7 Bankruptcy
To file successfully for Chapter 7 bankruptcy, there are roughly 4 steps including the following:
- You will want to receive counseling from a professional and fill out any needed forms for Chapter 7 bankruptcy to begin.
- Next will be a meeting of creditors, following the appointment of a trustee for your bankruptcy case.
- To pay creditors, the seizure and liquidation of nonexempt property follow. Each state has its own idea of property exemptions. In most cases, you’ll be able to keep your car, personal possessions, and primary home.
- Finally, the remaining debt in existence should be discharged thanks to your having filed for bankruptcy protection by declaring Chapter 7 bankruptcy.
Important:
- Keep all of your bankruptcy documents because some creditors, even though they have no right to do it, may still pursue debt recovery from you.
- For the next 10 years, your credit report will show the instance of bankruptcy. This could hamper your future attempts to get a loan, buy a car, etc.
Now that the question, “How does Chapter 7 bankruptcy work?” has been answered, here’s whom to talk to.
Considering Filing Chapter 7 Bankruptcy? Speak with The Debt Defenders by Ciment Law Firm, PLLC
Talk to the professionals at The Debt Defenders by Ciment Law Firm, PLLC for assistance with filing for Chapter 7 or Chapter 13 bankruptcy, or for further clarification between the two. One will likely be more appropriate for your situation than the other.
Contact us today at 866-493-1308 for an appointment. You can also fill out our convenient online form to begin communication.