A bankruptcy chapter 7 is a liquidation proceeding in which unsecured debts are discharged and nonexempt property sold off to pay off certain creditors. Businesses and consumers can use a Chapter 7 to relieve them of overwhelming debt and to save most if not all of their assets from seizure.
Any debtor wishing to file a bankruptcy chapter 7 must qualify. All states and their counties have established a median income amount, which a debtor’s income cannot exceed. If it does, they can still qualify if their disposable income, or the amount remaining after deducting monthly living expenses and required secured loan payments, does not go above a certain amount.
Once you qualify, you need to immediately take a credit counseling class within 180 days of filing. This is a short course that many bankruptcy law firms provide for their clients at low cost.
A bankruptcy chapter 7 filing automatically stays all civil proceedings including creditor phone calls or contact or any collection activities like wage garnishments.
In your petition, you are required to list all your debts and creditors and not omit anyone regardless of your close relationship. You must also list the market value of your assets and provide proof in some cases for larger property items.
All states provide an exempt value for certain property, or you can choose the federal exemptions if your state permits it. Your home, auto, furniture, tools, and other items have certain exempt limits.
Unsecured debt as well as some taxes are dischargeable, while student loans, court fines, fraud judgments, and most taxes are not dischargeable.
After completing a financial management course and no objections are filed, you are granted a discharge about 4 months after your initial filing.
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