Area of Law:
Bankruptcy is difficult and controversial but the last and only resort at some times. Most of us take a loan with an intention of paying it back fully. However, sometimes our economic conditions become such that we are not able to do so. Anybody who has been in that state knows how the continuous efforts of collection and harassment to recover those loans by the recovery agencies and the creditors can take a toll on you physically and mentally. In such conditions filing for a bankruptcy becomes inevitable and most of the times, maximum people opt for the Chapter 7 bankruptcy. This post decodes this much in use bankruptcy and enlists some things that everyone should know about this bankruptcy.
Who Is Eligible For Chapter 7 Bankruptcy?
The 2005 rules and reforms regarding bankruptcy had created enough stir in the markets and newspapers to know that the filing of a bankruptcy was a little more difficult process now. However, bankruptcy is more need driven than want driven and hence the numbers filing for bankruptcy hasn't registered a sharp decline post the reforms. But, now one needs to clear the Bankruptcy Means Test established by the BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection) to be eligible to file a Chapter 7 bankruptcy.
When Should You Contemplate A Chapter 7 Bankruptcy?
Filing for bankruptcy is not an easy task. Obviously there will be doubt in your mind regarding the complications, insecurity that your property will be taken away. But there are some conditions when Chapter 7 bankruptcy really is a much better option than following the predatory terms of the credit card companies and debt consolidation agencies. When you live in your own property, have a business in USA and know that there is no way you can repay your creditors and have no assets that you can sell either to free yourself of debts you should be considering filing Chapter 7 bankruptcy.
What Does Chapter 7 Bankruptcy Do then?
Chapter 7 Bankruptcy is also referred to as the 'elimination' or 'liquidation' bankruptcy. This is so because this bankruptcy eliminates or discharges all your dischargeable debts. What happens is the government discharges or rather cancels out all your debts, thus giving you a large degree of freedom from financial burden. You may actually be left with no debts.
What Are The Dischargeable Debts That Chapter 7 Can Eliminate?
Many people have some doubts and confusions regarding what are the debts that Chapter 7 clears. The most obvious ones are credit card debts, business loans, tax debts, foreclosures, debt from personal loans and debt from repossessions. Besides these, there are numerous other debts that this bankruptcy clears for you including medical bills, social security overpayments, dishonored checks, collection agency accounts and many more.
What Are The Debts That Chapter 7 Cannot Eliminate?
The Bankruptcy Code lists 19 categories of debt that cannot be discharged. These are usually child support, alimony, court judgments for intoxicated driving, student loans and recent debts incurred for indulging in luxuries. But you must also remember that any fraud or misbehavior attached with the dischargeable debts can also make them non dischargeable.
So if your main purpose is to eliminate your non-dischargeable debts, Chapter 7 bankruptcy is not going to solve your problem.
Exemptions to Property When You File For Chapter 7
Most of us are very worried about how much of our property we will need to give up when we file for bankruptcy. Some property is clearly exempted in Chapter 7 while the rest can be taken up by the bankruptcy trustee. The following are exempted:
• Necessities like basic clothing, household appliances, furnishings and regular electronic goods (no luxurious amphitheater systems) and jewelry upto a certain value.
• A part of your hitherto unpaid but earned wages
• Social Security Benefits
• Motor Vehicles upto a certain value
• The basic tools you will need in your profession
• Life Insurance till a certain value
The Non-Exempt Property Include
• A Second Vacation Home
• Ancestral Heirlooms
• Second homes (which nobody is residing in) and second vehicles.
• Bank accounts, cash, bonds, stocks and other investments.
Some Other Essential Information One Needs to Know About Chapter 7 Bankruptcy
• If you have had a bankruptcy case dismissed in the prior 180 days while filing, you are not eligible for Chapter 7 Bankruptcy.
• The New Bankruptcy Laws of 2005 states that you can file Chapter 7 Bankruptcy once every eight years.
• Bankruptcy discharge stays on your credit report for up to 10 years for most purposes. However, as your credit score starts improving, the presence of the bankruptcy will not prevent you from getting any financial benefits available to citizens without bankruptcy.
Importance of Legal Counsel
The process of filing for Chapter-7 Bankruptcy and navigating through it in the most efficient way has become a little difficult for citizens after the reform. Hence consulting and taking the services of an expert Chapter 7 Bankruptcy lawyer has become very important. Your lawyer will take best care of your interests right from the process of filing the bankruptcy, the creditors' meetings to the creation of the bankruptcy estate, registering you in a good financial management course, dealing with any objections to discharge and finally getting you the discharge and seeing that your case is closed properly.