A Closer Look At Chapter 7 Bankruptcy

Articles » Bankruptcy Related » Look At Chapter 7 Bankruptcy





The federal court in the process of Bankruptcy in Chapter 7 is aimed at helping both businesses and individuals in clearing up their debts and repaying under the protection given by the bankruptcy court.

There are basically two types:

• Liquidation
• Reorganization

Liquidation:
The Liquidation bankruptcy occurs when you plead the court to have your debts discharged. The bankruptcy court will then liquidate or sell some of your properties, returns of which shall be divided among your creditors. This type of bankruptcy proceeding lasts for four to six months which is quite fast and only one appearance at the courthouse is necessary. It is very convenient and doesn't require payments stretched over time.

Chapter 7 bankruptcy isn't available to everyone, you may not benefit from it if in the past six to eight years, if you have benefited from a bankruptcy discharge. Likewise, if after examination of your income, expenses, and overall debt, it was found out that the other type of bankruptcy proceeding is more appropriate, then you can't insist on pursuing this kind.

The new rules have been imposed to judge the criteria of the bankruptcy. One of the considerations is your current monthly income which in turn will be compared against the median income for a family of similar size in your state. This isn't your income at the time of your filing. Instead, it is your average income for the past six months before filing. Social Security benefits like retirement and disability benefits aren't included in the computation. If your income appears to be enough to support the other type of bankruptcy proceeding in spite of permitted expenses and payments for child support, tax debts, and others, liquidation bankruptcy is unfortunately not allowed.

Reorganization
Under Chapter 13 in reorganization bankruptcy when you file to a bankruptcy court a plan on how you intend to settle your debts. You indicate how much each of your creditors will get, depending on your finances. There is normally a period of three to five years period for the repayment plan to settle your debts however At times due to obvious financial difficulties, the court itself decides to give a discharge earlier than planned and this is what usually happens.

To identify if bankruptcy is really essential there is an additional requirement for both types of bankruptcy is completion of credit counseling conducted by an agency recognized and approved by the United States Trustee’s office. This allows you to see several possibilities of informal repayment which you may have overlooked in the past. Furthermore, completion of post-counselling is required after the proceedings. This aims to teach you financial management to avoid encountering the same situation in the future. The bankruptcy discharge will not be released unless this is fulfilled.

Bankruptcy, although generally advantageous, must be considered as a last resort. You should, in all circumstances, work hard to be in full control of your finances to avoid being estranged in difficulties. Discipline is indeed a very crucial trait that must be maintained at all times.

Chapter 7 bankruptcy may be beneficial for both the debtor and creditor. This is a way of recognizing one’s responsibilities and mistakes that led to the financial difficulty. The entire process takes into consideration both parties’ interests and leads to the development of an action plan that fulfils them. As such, this law shouldn't be abused by any debtor thinking that a court is there to intervene.

Request Free Quotes to improve your credit