Bankruptcy filing for chapter 7
To file for Chapter 7 bankruptcy, is a legal remedy that provides a fresh financial start to consumers and businesses by canceling all or many of their debts. The typical Chapter 7 bankruptcy is a routine process that requires no special courtroom or analytical skills. Under the new bankruptcy law that went into effect, most filers will have to:
Get credits counseling from an agency approved by the United States Trustees office
Attend a five minute, out of court meeting with a bankruptcy court official
Take a two hour budget management course
Wait for three to six months for their bankruptcy to become final and their debts to be discharged
II. Gathering Information On Debts and Assets
A lawyer will prepare and file the schedules, making sure all information is provided to the court and all the exemptions are correctly claimed. If we hire an attorney to file for Chapter 7 bankruptcy liquidation bankruptcy, we want the attorney to make sure to keep everything entitled so that all debts can be discharged.
Begin by providing all the required information for presentation to the court. This is essentially a list of all the debts and assets. Most bankruptcy attorneys will give worksheets to complete.
After this, the attorney will transfer the information from the worksheets onto the required forms that later will be filed with the court. Attorney should review all the debts and assets information so that matters will be resolved favorably on the behalf.
III. What To Watch For In Listing Debts
In reviewing the list of debts, the attorney should tell that any debt not listed or listed with an improper address is not discharged. We should list not only the obvious debts but also the names of everyone who might have a claim, such as ex-business partners, former customers or anyone who has not yet raised a claim against, but might do so.
Listing a possible claim may wipe it out; that would mean we have not to worry about it anymore.
Once all the debts are listed in the schedules, we should review them to make sure they are listed properly.
IV. Priority Claims, Secured And Unsecured Claims:
As the attorney lists the debts in the schedules, the debts should be divided into proper categories. The three main categories are priority claims, secured claims and unsecured claims.
In listing the priority debts, the attorney should look closely at any taxes we owe. In most cases they are not dischargeable, but the taxing authority cannot collect from us, while we are in bankruptcy. However, as soon as we are discharged, the taxing authority can resume collecting from us. The attorney should check to see if any of federal income taxes can be discharged. Under certain circumstances this is possible, for instance, if the income taxes were due more than three years before the filing of the bankruptcy petition.
In listing all the secured debts it is important that the attorney describe the collateral completely and state their most accurate values in the schedules. Most debtors overestimate the value of their assets and this is not advisable. The attorneys experience should help to develop accurate values. Remember, the court is not looking for what would have to spend to replace the asset. Instead, the court wants the present fair market value. Proper evaluation is important because the larger the equity we have in assets, the more likely will be used for exemptions and to relinquish an asset to the trustee. Attorney should inform to keep any asset that is collateral on a loan, such as house, car or furniture; we must continue to make payments.
In itemizing the unsecured debts in the petition, the attorney should be sure to have provided complete addresses to ensure that the debts will be discharged. The date the debt was incurred in significant. If the debt was incurred just before the filing of the bankruptcy, the attorney should discuss with us the possibility that the debt may not be discharged. Remember that some charges and cash advances cannot be discharged if they were made just before the filing of the bankruptcy.
V. Listing Assets And Claiming Exemptions
After the attorney has listed all the debts and assets, he or she must elect the exemptions are entitled to receive. This is most important in a Chapter 7 because it determines what we will be able to keep. We should inform of any property that is not exempt because property that must be surrendered to the trustee may be important to us.
VI. Reviewing The Statement Of Financial Affiars
Trap for the unwary
The questions in the statement of financial affairs are intended to discover inappropriate financial transactions and to locate additional assets.
Why certain questions are asked
It is important to know why some questions are asked and what answers will cause problems with the trustee. The following are the most important to consider.
Questions 1 and 2 ask, what amount of income we have received from our trade or profession and from other sources during each of the two calendar years, immediately preceding the filing of the original petition.
VII. Higher Income Filers Face An Additional Hurdle
Some file for Chapter 7 bankruptcy about 15% according to a recent study will also have to do some calculations to find out whether they could afford to pay back a portion of their debt over a five year period. This additional requirement is called the means test and filers who could afford to repay some of their debts according to its calculations may not be allowed to file for Chapter 7. The means test will not affect most filers, however, because it applies only if average income in the six months before the file is more than the state median income for a family of the size, a category into which most Chapter 7 filers do not fall.
VIII. Chapter 7 Is A Rescue From Hard Times
Although significant changes may occur in the bankruptcy laws relating to Chapter 7, the average person will still be seeking relief under this type of bankruptcy. No matter what the legislators or credit card companies believe, most people who file Chapter 7 are people, who have exhausted all other alternatives. They have fallen on hard times through health issues employment problems, accidents or a number of other circumstances that have made it impossible to maintain their credit obligations.
Under current law, file for Chapter 7 bankruptcy can be filed once during a six year time period. The majority of people who file Chapter 7 do it only once in their lifetime. It is not an enjoyable experience. It is a legal maneuver that exists and that should be used to resolve crushing financial problems.
The court appointed Trustee will take charge of all and will decide what to keep and what to give up. No one comes out of a bankruptcy unscathed. Everyone loses something, but a good attorney and careful planning can ensure to safeguard something. An irresponsible person does not file bankruptcy. An irresponsible person simply walks away from it all, leaving all the unsecured creditors holding the bag. Chapter 7 is a positive step taken by responsible person. While filing a Chapter 7 bankruptcy, begins a long process that requires honest and calculated preparation.
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