Chapter 7 Bankruptcy
How Does Chapter 7 Bankruptcy Work?
Bankruptcy, in a broad sense, means that you declare yourself bankrupt and under the guidelines of the federal court, you will be protected by the bankruptcy court while your debts are repaid using either liquidation or reorganization of your assets. There are several types of bankruptcy; however, Chapter 7 Bankruptcy, where liquidation is used to pay back debts, is the most well-known and often filed for by debtors facing financial difficulties. There are certain prerequisites for filing for Chapter 7 Bankruptcy. Certain steps are undertaken such as budget analysis and mandatory credit counseling along with a means test to determine your eligibility for this form of bankruptcy. The chances for you achieving a bankruptcy relief under Chapter 7 are greater if your income is less than the median income required for your family in your state. Also, remember that if you are an individual with debts, then you will file Consumer Chapter 7 Bankruptcy, and if you own a business, then you will file Business Chapter 7 Bankruptcy.
Benefits of Chapter 7 Bankruptcy
There are several benefits of filing for Chapter 7 Bankruptcy, which is the reason that it has become so popular that you automatically associate bankruptcy with Chapter 7 Bankruptcy. Some of the benefits are mentioned below:
The bankruptcy law awards you automatic stay. Your creditors cannot go ahead with the collection efforts, i.e., your assets cannot be sold before the formal proceedings are over. Additionally, the creditors cannot file any new lawsuit. All this grants you ample breathing room in the financially tough period.
At the end of the proceedings, you can start your life with a clean slate as all your debts are paid back by liquidating your assets.
Also, all your assets are not sold. There are some items that are exempted from liquidation such as reasonably necessary furniture, clothes, household appliances, and car.
Unsecured debt, not backed by collateral, and credit card debt are forgiven in case of Chapter 7 Bankruptcy.
Reasons for Hiring an Experienced Chapter 7 Bankruptcy Attorney
You should hire a Chapter 7 Bankruptcy attorney as soon as you start thinking about filing for bankruptcy. Hire an experienced one who has handled a multitude of similar cases and knows the bankruptcy law comprehensively, both academically and practically. An experienced Chapter 7 Bankruptcy attorney will guide you thoroughly throughout the proceedings of your case. He/she will also help you in passing the eligibility tests and assembling the information required by the bankruptcy court such as list of creditors, source of income, list of property, and detailed monthly expenses. Moreover, although when you file for bankruptcy, the court gives you breathing room in the form of automatic stay, however, sometimes creditors ask for the lifting of the stay. In such a scenario, you need an experienced Chapter 7 Bankruptcy attorney to fight on your behalf.