A Chapter 7 bankruptcy is commonly known as a “liquidation” bankruptcy, whereby the Trustee sells the debtor’s nonexempt property and distributes the sale proceeds to the creditors. It is one of the more common ways that individual consumers seek relief from their legal obligation to repay their debts.
Qualifying for Chapter 7
Qualification for a Chapter 7 bankruptcy requires calculating a debtor’s “current monthly income” and seeing if it exceeds the state median. If the debtor’s current monthly income does exceed the median, the Bankruptcy Code requires the application of the “means test” to determine whether the Chapter 7 filing is presumptively abusive. If the filing is not abusive, then the debtor qualifies for filing Chapter 7. If the filing is abusive, the case will generally be either converted to a Chapter 13 or be dismissed.
Filing Chapter 7
A Chapter 7 case starts with the debtor compiling and submitting all the required documents to his or her attorney. The attorney will then review the documents and prepare the petition, including calculating the “means test.” All the assets and debts have to be listed in the petition, so it is paramount that a debtor finds an experienced and competent attorney. Prior to filing the petition, the debtor must also complete an online credit-counseling course.
Once the petition is filed, the debtor will then have to do two more thing. First, he or she will attend a “meeting of creditors.” This is an opportunity for the Trustee to interview the debtor, as well as for the creditors to inquire about the debtor’s assets and intentions regarding those assets. Second, the debtor will take another online financial management course. If no other issues arise, the debtor will then receive a discharge of his or her debts thereafter.
Discharge in Chapter 7
In a successfully completed Chapter 7 bankruptcy, most unsecured debts will be discharged. Unsecured debts include credit cards, medical bills, personal loans, cash advances, utility bills, and payday loans. However, some debts cannot be discharged in a Chapter 7. Such debts include student loans, child support, criminal restitution, back taxes, and governmental debts. It is important to find an experienced attorney so that you can properly discharge your debts. Contact Orange County bankruptcy attorneys atTran Bankruptcy Law for more information.