Chapter 7 bankruptcy is the most common form of bankruptcy filed by consumers in the United States. Although filing for Chapter 7 bankruptcy won’t magically erase all your debt, it can help you get a fresh start and re-organize your finances. Essentially, filing for Chapter 7 bankruptcy will give you a court-appointed trustee to manage your bankruptcy case.
This trustee is in charge of your assets and may liquidate or sell them to pay off your creditors. Thankfully, trustees do not take possession of all your property as some items are “federally exempt” from bankruptcy.
Before filing, take time to gather all your financial statements including loan documents, credit card bills, statements, and even paystubs. You will use these documents to fill out the proper paperwork to begin the bankruptcy process. The US courts website www.uscourts.gov will have all the paperwork you need to begin the process.
If you are in the process of filing for Chapter 7 bankruptcy, you will need to speak to a “credit counselor” before your case can proceed. Usually, the credit counselors goal is to see if there are any other options available to you before you file for bankruptcy.
This conversation can also happen via phone call. You will also be required to pass a “Means Test”, which calculate if you can afford to pay a partial amount of your debt. The Means Test takes your income and the median income for your state of residency. If you do not pass this, it will be very hard to file for Chapter 7 bankruptcy.
After you pass your “Means Test”, the court will file a notice called the “Meeting of Creditors”. This document will also be sent to all the lenders and creditors you listed when filing bankruptcy. During this meeting of creditors, the trustee will ask you various questions about your bankruptcy claim.
The trustee also has the right to investigate your finances and extend the bankruptcy further if they feel there is a need to investigate further. As the name can tell you, your creditors also have a right to be at the meeting and ask you any questions regarding your bankruptcy claim. Usually, only the provider of your auto loan and the IRS will be present to ask you about how you plan on paying them back, especially with the non-dischargeable taxes.
Except for bankruptcy exempt property, the court-appointed bankruptcy trustee has the right to seize and sell your property. You are allowed to keep your retirement accounts (including your 401K). Any other asset that the trustee can take will be sold to repay creditors. Before you are discharged of your debts, you will also be required to take a financial management class. This course is usually 2 hours long and in some states can be completed online or by phone.
If there is no objection to your case, the court will give you a discharge after the last day creditors and lenders can object your discharge. Usually, this is 60 days after the first meeting of creditors. After a discharge, creditors cannot attempt to collect any debts. However, debt such as child support, taxes, and alimony cannot be discharged. It is important to note that bankruptcy will last for up to 10 years on your credit report.
If you are looking to file for bankruptcy and don’t know where to turn, CrediReady can help. With one of the worlds largest networks of attorneys, we can provide you will a free, confidential, and no-obligation consultation with a local attorney. Fill out our free no obligation form today to get your free consultation today!