When to File a Chapter 7 Bankruptcy
If you are battling with a bad debt, you may use bankruptcy Chapter 7 to shield yourself from unsecured debts. Also known as the liquidation chapter, corporations and individuals use it when their financial situation is beyond repair. The main question is when to file bankruptcy Chapter 7. Is there a specific time and circumstances under which you should seek bankruptcy redress? Before we delve into the conditions for filing Chapter 7, it is important to understand what it entails.
What does Chapter 7 involve?
Usually, it focuses on the liquidation of assets. Hence, the Chapter 7 trustee has the mandate of selling any non-exempt properties and dividing the collections among your creditors, based on the guidelines of the law. The eligibility to file for this bankruptcy settlement plan is established using the means test, according to the bankruptcy amendments of 2005. However, in most cases, assets are considered “exempt”, meaning that liquidation will not be an option.
The process starts by filing a form for the bankruptcy Chapter 7. You are then supposed to list all your properties and assets. All debts, regardless of their nature, should also be included in the list. Honesty is important when you are filing for bankruptcy. Any indication that you defaulted on complete disclosure of your financial information can ruin your chances of filing for Chapter 7 bankruptcy.
Creditors are called for the 341 meeting, where the trustee inquires about your assets and liabilities. After this, they sort out your non-exempt assets, which they will sell later and then distribute the money among the creditors. Debtors are called for reaffirmation, where they can redeem, reaffirm and return debts, especially those secured with personal properties. Once the trustee and the creditors agree to the debtor’s discharge plan, the Chapter 7 trustee takes charge to ensure that the plan is implemented fully.
Conditions which can warrant Chapter 7 bankruptcy filing
When to file for bankruptcy Chapter 7- If your financial situation has turned from bad to worse, filing for bankruptcy can be helpful. Here are some of the situations, which can warrant a bankruptcy filing under Chapter 7:
- You have enormous medical and credit card debt - by applying for Bankruptcy under this chapter; you can do away with all unsecured debts. The case for Chapter 7 takes a shorter time; hence, you can complete the process quicker and make a fresh start in your life.
- You are already receiving notices and calls for collections - as your debt ages, debt collectors become more persistent in calling you and giving notices for the collections. This can add more stress to your ailing financial situation. When you file for the bankruptcy Chapter 7, creditors are prevented from calling you and can only deal with the court.
- You do not own many assets - If you do not have many properties, then a Chapter 7 bankruptcy plan will work for you. This is because it does not offer adequate protection for your property. Nevertheless, you will be allowed to keep your car, home and other possessions such as clothes and appliances.
- You hardly have enough to pay your bills - the means test is used to determine when to file for bankruptcy Chapter 7. The test assesses whether bankruptcy is a necessity in your case.
- You have a low credit score - while filing for bankruptcy influences your credit score negatively, if it is already low, clearing debts and starting afresh can help a great deal.
When to file for bankruptcy Chapter 7 - If the above financial conditions describe your case, you would benefit from filing for Chapter 7.
My name is Craig R. Chlarson. Whether you are seeking to eliminate your debt, typically through a chapter 7 filing, or whether you are seeking to reorganize your debt, typically through a chapter 13 filing, or even if you have basic bankruptcy questions, call me today. I can help you.
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