In order to get relief from bankruptcy, people generally prefer to opt for Chapter 7 bankruptcy, which is also known as straight or liquidation bankruptcy. Let us see what the idea behind this Chapter 7 bankruptcy is. In this kind, your trustees will liquidate all your property in order to pay your creditors. This way you can wipe off all your debts. However, in reality most of the debtors under this bankruptcy give up very little of their property.
In case, you need to consult any legal professionals in respect to Chapter 7 bankruptcy then you may visit the website thebklawyers.com. Let us review some more details about this bankruptcy in this article.
File your Petition for Chapter 7
To start with, you need to file your petition in the court by filling number of forms. In those papers, you need to mention about all your debts, property details and various financial transactions that you have carried out recently.
You need to Qualify for Chapter 7
Not everyone is eligible to claim for this kind of bankruptcy. In order to qualify for this, you need to pass certain tests which are known as ‘means test’. You are eligible for this test, if your income is lower than your state median income. However, if your income happens to be higher than state median then you must provide information about all your expenses. In case, your income is sufficient that you can clear few of your debts within the period of 3 to 5 years then you will fail to qualify for Chapter 7 bankruptcy.
After you file your petition, the court will assign a trustee for your case. The job of the trustee is to ensure that all your creditors are paid off as much as possible. In case, you have any nonexempt property in your name then your trustee will make effort to sell them and use all the proceeds for clearing your various debts to your creditors.
The Automatic Stay
As soon as your petition for Chapter 7 is accepted by the court then the court will send notice to all your creditors for automatic stay. In such condition, your creditors cannot push you to claim their money from you. However, in certain cases your creditors have the right to ask court to lift the automatic stay.
Your property exemption
Some of your property may be out of reach of your bankruptcy trustee, which is known as exempt property. If your property is covered under exemption then you can keep them with you. Usually most of filers of this bankruptcy does not lose their property due exemptions.
Your secured property
In case, you have pledged your property in the form of collateral then it is called secured property, which can be used for clearing your debts. Example for this includes mortgages and car loans. Therefore, it is not preferred option to apply for this bankruptcy for homeowners.
After the case is over majority of your debts will be taken care of.