What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is an option for individuals, partnerships, corporations, and other business entities that is often considered a last resort to pay off many types of unsecured debts and reset finances. Also known as the liquidation or straight bankruptcy, Chapter 7 can provide someone the opportunity to start again financially with the right support from an experienced bankruptcy attorney. To learn more about whether Chapter 7 bankruptcy is right for your situation, call or contact The Law Offices of Omar Gastelum and Associates today to schedule a consultation with a knowledgeable bankruptcy lawyer.
Who is Eligible for Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is applicable for individuals as well as all types of business entities. Individuals must pass a means test to ensure that this bankruptcy option is not presumptively abusive. If an individual’s monthly income is above the state average, abuse is presumed if the debtor’s aggregate monthly income over five years, minus certain expenses, is more than either $12,850, or 25% of the debtor’s nonpriority unsecured debt, if the amount is at least $7,700. In order to qualify, the debtor must not have had a prior bankruptcy petition dismissed within 180 days due to willful failure to appear and they must have undergone credit counseling from an approved agency.
How Does Chapter 7 Bankruptcy Work?
The process begins with the filing of substantial paperwork with the bankruptcy court, including a petition for bankruptcy, schedules of assets, income, statements of financial affairs, and schedules of contracts and leases in addition to tax returns and other forms. The debtor must also provide a list of all creditors, the amount of each debt, and the nature of each claim.
The debtor then provides a list of all sources of income, all real estate and personal property owned, and a detailed list of the debtor’s monthly living expenses. Certain property and expenses are considered exempt from Chapter 7 liquidation and protected from the claims of creditors. Common examples include the primary residence, vehicles, clothing, and other essentials.
Once the petition is filed, all creditors must cease collections attempts with the debtor, and a meeting of creditors usually takes place within a month. The debtor is required to attend the meeting and answer questions regarding their property and financial affairs. After this meeting, the trustee of the debtor’s bankruptcy case liquidates all nonexempt property and pays off creditors according to their class. Any of the remaining debts may be discharged or reaffirmed to avoid further collection efforts by creditors that are still owed money after the Chapter 7 liquidation process. To learn more about this process, talk to an experienced bankruptcy attorney today.
Talk to Our Office Now
Chapter 7 bankruptcy is one of many options available to individuals and businesses struggling to pay their debts. If you would like to learn more about your options for bankruptcy and whether Chapter 7 is right for you, call or contact The Law Offices of Omar Gastelum and Associates today to schedule a consultation of your case.