When your financial situation seems to have gone into shambles, you can no longer effectively meet your debt repayments, and you are constantly harassed by your creditors, filing for bankruptcy is in most cases one of the best ways out of the dire situation. However, there are various different types of bankruptcies under the law, the most common ones being chapters 7, 11, and 13. Each of these has its own descriptions, merits, demerits, qualification requirements, and conditions. Chapter 7 Bankruptcy is one of the most popular options and the easiest to file for most people, due to its lesser limitations and conditions. Most Bankruptcy attorneys, such as Atlanta’s The Ballard Law Group, also deal with this particular chapter since it’s applicable for both individuals and businesses in some circumstances. This article seeks to answer the question, what is Chapter 7 Bankruptcy? It also briefly explains some of the basics you should know about chapter 7 bankruptcy, including its benefits, the legal requirements, and how to go about the filing process.
Understanding Chapter 7 Bankruptcy
If you have a debt(s) that you want to get free from, filing for chapter 7 bankruptcy can be a good way out. It is alternatively known as liquidation bankruptcy, in which your debts may be discharged in full or in part depending on your current financial situation and other prevalent factors. However, sometimes some the court may rule that some of your property be sold off or liquidated to pay some of your creditors. If you a sole proprietor or proprietor in a partnership or company that wants to shut down your business operations, chapter 7 can be an ideal way to set yourself free from your unmanageable debts. The time it takes to file the procedure and get conclusive favorable hearing actually depends on whether or not you get a good bankruptcy attorney/representative to push your case through. It also depends on whether or not you pass the chapter-7 bankruptcy means test, which determines your eligibility to file for this type of bankruptcy.
The Chapter 7 Bankruptcy Means Test
Under chapter 7 your eligibility to file for bankruptcy is determined using the means test, which is composed of two major parts. To qualify, you need to pass one of them. These are the Median Income test and the Disposable Income test. One passes test one (median income) if their income in the last 6 months is lower than the median income in their state. If one doesn’t pass test one, they have to pass test 2 (disposable income), which includes expense deductions against your income to determine the amount you can be able to pay your creditors over the following 5 year period.
Filing for Bankruptcy under Chapter 7
Filing a bankruptcy case under chapter 7 begins with presenting a petition, accompanied by schedules and financial affairs statements. The petitioner requires filling in a bankruptcy declaration form, in which details of their assets, debts and financials are listed in. This is in most cases the most vital and time-consuming stage of bankruptcy filing under chapter 7. When declaring your assets, the term property refers to any assets or possessions by the petitioner. The schedule should also include not only the debts owed but also the details of individual creditors and their contact addresses as well as their amounts owed. A filing is usually done in the resident district of the debtor or where they have resided for the better part of the last 6 months.