Chapter 7 bankruptcy can be a good option if you’re struggling with overwhelming debt and have limited disposable income. It’s best suited for individuals who pass the Means Test, which determines if your income qualifies. If you’re unsure, our experienced attorneys can evaluate your financial situation.
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What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy, often known as “liquidation bankruptcy,” is one of the two forms of bankruptcy available to individuals struggling with high levels of personal debt. It is also sometimes known as “straight bankruptcy.” This nickname accurately describes the Chapter 7 process – it is a straightforward form of bankruptcy that filers can generally complete in three to four months. Chapter 7 bankruptcy raises money to repay the filer’s creditors by selling or liquidating their nonexempt assets.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is not for everybody. Individuals who do not pass the Means Test do not qualify for Chapter 7 bankruptcy, and even among those who do, it is not always the right course of action. Chapter 7 bankruptcy is an extreme form of bankruptcy that requires the filer to relinquish control of their assets to the bankruptcy trustee handling the case. It requires numerous sacrifices, but sometimes, it is the only way for a filer to regain control over their debt.
The Chapter 7 Means Test
You can only file for Chapter 7 bankruptcy if you pass the Means Test. If you earn less annually than your state’s median income for a household your size, you automatically pass and can file a Chapter 7 bankruptcy case. If you earn more than your state’s median income for a household your size, it is still possible to file a Chapter 7 case if you demonstrate that you do not have sufficient disposable income after making your monthly payments. Required payments include mortgage, car, and court-ordered payments like child support and alimony. If you do not pass the Means Test, you can file for Chapter 13 bankruptcy.
The Chapter 7 Bankruptcy Process
Once you file your bankruptcy petition, an automatic stay goes into effect. This is a court order for your creditors to stop their collection attempts. However, this will not stop certain obligations, such as child support payments. Your case will be assigned to a bankruptcy trustee, who will oversee it until its conclusion.
Within 30 days of filing your bankruptcy petition, your bankruptcy trustee will conduct a meeting of your creditors, also known as a 341 meeting. During this meeting, you must answer any questions from your bankruptcy trustee and creditors about your assets, expenses, liabilities, and income. This meeting aims to gauge your current financial situation and verify that you filed your original documents about these subjects truthfully.
After liquidating your nonexempt assets and completing your 341 meeting, you become eligible for a Chapter 7 discharge. This discharge of your debts allows the court to close your case and makes it possible for you to move forward with your life debt-free. A completed Chapter 7 bankruptcy will remain on your credit report for ten years following its closure.
Required Payments
Required payments include mortgage, car, and court-ordered payments like child support and alimony. If you do not pass the Means Test, you can file for Chapter 13 bankruptcy.
Work With An Experienced Merrillville Bankruptcy Lawyer
Chapter 7 bankruptcy can be complicated. Work with an experienced bankruptcy lawyer to ensure that you understand all aspects of the process and that your rights and interests are protected throughout. Contact Whitten & Whitten today to schedule your free consultation in our office.
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We are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code. This information is designed for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. Past results and testimonials are not a guarantee, warranty, or prediction of the outcome of your case, and should not be construed as such. Past results cannot guarantee future performance. Any result in a single case is not meant to create an expectation of similar results in future matters because each case involves many different factors, therefore, results will differ on a case-by-case basis. By providing contact information, users acknowledge and give explicit consent to be contacted via the methods of communication provided, including SMS. Message and data rates may apply. Message frequency may vary. Reply STOP to opt out.
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