Chapter 7 Bankruptcy

One of the most common types of bankruptcies filed today is a Chapter 7 bankruptcy. This type of filing is designed to alleviate most, if not all, of a debtor’s burden and help that person regain control of his or her finances. With this filing, people are required to show that they are eligible for liquidation of their debts. However, if they do not meet this criteria, they could still be held liable for their debt and be forced to consider filing another type of bankruptcy case.

According to bankruptcy law, people who wish to file a Chapter 7 must first show proof of their debts, income, and assets. People with significant incomes or those who have filed other recent bankruptcy cases are generally disqualified from asking the court for liquidation of their debts. This means test is designed to eliminate abuse of this type of case and to help people genuinely in need of this relief to have access to this form of legal help.

In addition to showing proof of their incomes, debts, and assets, people also must pay filing fees for their cases. These fees are generally affordable; however, if people cannot afford them up front, some courts will allow them to make payments or defer the costs.

After paying the court’s fees, people and their lawyers can then begin the process of putting together their case. This process involves listing each creditor and the amount that person or business is owed. It also involves providing details about assets that can be sold and used to pay off debts. The fact that their assets could be used to pay off their debts scares many people. They think that their house, car, and other property will be taken from them. However, chapter 7 bankruptcy allows people to keep some, if not most, of their property. They are allowed to keep their primary family residence, as well as their car that they use to get to and from work. Assets like second homes, secondary vehicles, vacation houses, plots of land, and other liquid assets can be seized and sold by the court to satisfy amounts owed to creditors. The types of assets that can be used for this purpose varies in each state. Thus, people are advised to rely on competent legal counsel before filing.

After their cases are filed with the court, clients are then generally expected to attend a hearing to determine if their debts can be relieved. This hearing must be scheduled within 40 to 60 days of filing of the case. Clients must attend or their cases could be dismissed. While some people worry about what will happen in the hearing, they may take comfort in knowing that the judge more than likely will not be present. Most of these cases are overseen by a trustee of the court, someone who acts with the judge’s authority and is held responsible for uncovering any abuse of the bankruptcy law or deciding if a person is eligible for this type of filing.

This hearing, called a 341 hearing, can also be attended by a person’s creditors. The creditors are given the opportunity to question the client about his or her debt and assets. If a creditor has an objection, the trustee will hear that argument and document the creditor’s objection to the filing. This information is then considered by the judge, who may or may not dismiss that debt.

Certain types of debts cannot be included in this type of filing. Most states do not allow people to claim student loans, delinquent child support, or tax liens to be declared on their bankruptcies. These, as well as any other type of debt, may be settled by making private payment arrangements with those creditors.