Bankruptcy is when a person or business finds it necessary to seek protection from their creditors. Chapter 7 bankruptcy is known as a liquidation bankruptcy because if a person or business has any assets that “are not exempt under the Bankruptcy Code” those assets can be used to pay off debts that are outstanding.
In most cases businesses file for this kind of bankruptcy when they are no longer able to stay in business and where assets that remain must be “liquidated” to pay off those to whom they owe money. With a chapter 7 bankruptcy debtors have to pass a means test. Taking this test will show if they are eligible for Chapter7.
It is important to note that the Chapter 7 bankruptcy process takes between four and six months costs between $300-$350 and usually takes just one visit in the local court system. In addition a course of credit counseling has to be completed and approved by the United States Trustee.
Most individuals and businesses can file for this type of bankruptcy; except for those have received a bankruptcy discharge in the last six to eight years. In addition almost 100 percent of those who file for Chapter 7 bankruptcy do not lose any of their property. However depending on your state law and how much property you have will decide if you are able to keep your car house or other property.
While some think that a person’s credit is ruined for life once they have gone through bankruptcy that is not true. Your credit will not be ruined but it will be recorded and kept on your credit report for about 10 years. Before you file for any kind of bankruptcy you will need to complete a credit counseling course and it must be pre-approved by the bankruptcy court. Keep in mind that the “Means Test” which is a way for your finances to be examined carefully does not apply to everyone but you need to check it out before applying for any kind of bankruptcy. And what some may not know Chapter 7 bankruptcy can only be filed every 8 years.
What is comforting to some is that you will probably have to attend just one court hearing and that doesn’t happen until about 30 days after the bankruptcy case has been filed. At the end of the bankruptcy case a discharge order is given by the bankruptcy judge. What this means is that all debts have been discharged.
It is important to note that student loans child support and taxes are not erased in a Chapter 7 bankruptcy. However in some cases taxes are discharged. Some may also not know that if you are allowed to keep your car or home after you have filed for bankruptcy you need to continue to make payments on those loans. You do have two choices on your property: you can allow the creditor to take back the property or you can keep the property but if you do you must continue making payments to the creditor.
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With a Chapter 7 bankruptcy there are several worthwhile benefits such as: protecting your property from you creditors stop creditor harassment stop lawsuits and garnishments wipe out personal loans payday loans and other unsecured debts eliminate repossession and foreclosure debts and have the ability to rebuild your credit.