The Simple Facts About Chapter 7 Bankruptcy
There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code. Every one of them is known by the Chapter number where t is defined. For individuals, the most frequents types of bankruptcy are Chapter 7 and Chapter 13 bankruptcy. While the first one (Chapter 7 Bankruptcy), involves liquidating all assets that are not exempt, the other one (Chapter 13 Bankruptcy), implies a structured partial repayment plan for debtors who want to keep certain assets like boats or houses. We have to define what an "Exempt property" is. By law, this term refers to a property that a debtor is allowed to keep. The state low is responsible of determining what property is exempt. In certain states you are required to use the exemptions under your state's laws while in others (about fifteen states and the District of Columbia) you can chose the exemptions that work the best for you - either the federal exemptions or your state's exemption. Who is eligible for the Chapter 7 Bankruptcy? In order to have the answer at this one, you should pass the Chapter 7 means test. It was introduced in 1995 and there were a lot of opinions against it. The media often implied that this method of selection disqualifies a lot of people of filing for Chapter 7 Bankruptcy. Regardless of that, the truth is that more than 96% of people who take this test qualify for filing a petition. The rest of them may still be able of file the Chapter 13 bankruptcy. Which reasons could lead you to filing Chapter 7 Bankruptcy? It could be a seriously overextended credit or any other large unexpected expense in general, like marital problems or large medical expenses. What is happening if you decide to file Chapter 7 Bankruptcy? Basically, the Bankruptcy Code will allow you to keep certain exempt property while all the other remaining assets will be liquidate (sold) by a bankruptcy trustee. The money obtained by this means, are, after that, used to pay the holders of claims (the creditors) in accordance with their priority. If you are considering this type of petition you should be aware that it may result in the loss of property. Getting into details of the Chapter 7 Bankruptcy, we should clarify how much does it costs as well as how long does it take… In a few words, we can say that the process takes about four to six months, and the filing and administrative fees costs about $299 for the Chapter 7 bankruptcy (comparing with Chapter 13 Filing Fee of $274, for example). On the other hand there are the bankruptcy lawyer's fees which vary mostly between $1,000 and $2,000. Before summing up, we should also take a look wt what other options may there be to the Chapter 7 Bankruptcy. First of all, if you are a business man you may prefer to extend the time for repayment or to reduce your debt without going through the liquidation process. In this particular case, the Chapter 11 Bankruptcy could be a better solution for you. After that, there are the cases of individual debtors who have regular income and who may prefer an adjustment of debts. The Chapter 13 of the Bankruptcy Code will help them do that. A huge advantage of this type of Bankruptcy is that a debtor can keep his or hers home from foreclosure by using a payment plan which will allow him or her to "catch up" past due payments. |
