Chapter 7 bankruptcy doesn't involve the stipulation of a repayment plan for the debtor as is the case in bankruptcy chapter 13. In bankruptcy chapter 7, if a debtor has assets that aren't covered by an exemption, a trustee appointed by the court may sell the assets and split the proceeds to creditors as stipulated by the priorities in the Code. In exchange, a debtor will get a discharge of his or her liability for debts. In nearly 99 percent of individual bankruptcy cases, a trustee closes the case without having to sell any assets belonging to the debtor.
Part of the debtor's assets may be subject to mortgages and liens that pledge the asset to other creditors. Additionally, the Bankruptcy Code will let the debtor keep certain exempt property; although a trustee will liquidate all of the debtor's remaining properties. Accordingly, potential debtors must understand that the filing of chapter 7 might result in loss of assets.
Who Can File For Bankruptcy Chapter 7?
An individual can be eligible to file chapter 7 bankruptcy after going through a host of tests instituted by the 2005 bankruptcy code amendment. Some high earners may be ineligible for chapter 7 bankruptcy if their debts are mainly consumer debts. You can file for chapter 7 with the help of an experienced bankruptcy lawyer.
How Can You File For Bankruptcy Chapter 7?
The case typically starts by filing the official bankruptcy chapter 7 petition, including schedules and statement of financial affirmation. These forms are to include a list of your assets and debts, along with your recent financial history. It is important to state that every creditor will be listed in the bankruptcy schedule with an official mailing address. The debtor must also list all of their debts, even if the debtor intends to reaffirm their debt or the debt is nondischargeable. The schedules will also list your property, as well as any debts secured by the property in question, and the value of that property. The term property here connotes possessions or assets in general, not just real estate alone.
Your choice of exemptions can be determined on one of the bankruptcy schedules. The schedules will be signed under the penalty of perjury. Reckless, false, or inaccurate schedules can stop you from getting discharged. The schedules will be filed with a bankruptcy clerk in your district or in any other area where you have lived for the last 180 days. Generally, the rights of a debtor and creditors are those that are within their reach on the day the chapter 7 case was filed. All the proceedings in a bankruptcy case after the filing typically relate to the situation in a way that makes it seem like the same as the day the case was filed. An automatic stay usually goes into effect once a petition has been filed, ultimately creating a legal barrier when it comes to collection claims by creditors.
The bankruptcy court usually appoints a trustee and swiftly offers notice to the creditors listed in your plan that you have filed for chapter 7 bankruptcy. You will then get a copy of the notice when your creditors do.
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