Everyone wants to have a debt-free life. As we grow older, we all want to experience financial freedom. For bankrupt companies or individuals who are struggling with debt, all they want to do is to pay back all their debts to get a fresh start.
Among the different types of bankruptcy, Chapter 7 is considered the most conventional chapter in the United States. In this bankruptcy chapter, you can pay off your debts through the liquidation of assets. The bankruptcy court will assign a designated trustee to assist you throughout the bankruptcy process. He or she will do the consolidation of assets, supervision of selling, and allocation of the collected funds to your lender. Your trustee will not be allowed to completely wipe out all your acquired assets. Certain assets are considered exempt property. These will not be included in the assets to be liquidated.
Exempt property may be classified under state or federal statutes. Most of the frequent exemptions are residence, car, retirement accounts, and any property which is essential to your work. In most cases, there are no more adequate funds left after considering the exempt property. The remaining assets do not suffice the amount owed. The balance left unpaid will be “discharged”.
Before filing for bankruptcy, you need to prepare your financial records such as credit card debts, bank account statements, payslips, credit reports, and loan records. These documents will verify your assets and liabilities, debts, properties, living expenses, and income. The documents for Chapter 7 also include a schedule of liabilities, assets, statement of financial affairs, a voluntary petition for relief, and declarations regarding debtor education. You and your bankruptcy attorney will apply to the U.S. court and settle the filing fee.
Individuals who will apply for Chapter 7 bankruptcy are required to do credit counseling, qualify in the means test, and attend the 341 meetings.
Credit counseling is a part of the Chapter 7 bankruptcy process. The debtor is required to attend sessions with a certified credit counselor before filing the case. The counseling will let you explore all the possible options that will help you overcome bankruptcy.
As a debtor, you are required to take and qualify for the “means test”. This was included in the 2005 Bankruptcy Code. It gauges your financial ability to repay a significant amount that you owe. Your monthly income and the median income for your state will be compared in this test. Afterward, your expenses will also be compared to IRS Local Standards. The means test calculation is supported by Official Form 122A-1. You need to submit it to the bankruptcy court. If you failed the means test, you may opt to file Chapter 13 bankruptcy.
Chapter 7 includes a court order of “341 meetings” of debtors and creditors. In this meeting, the creditors will ask you a series of questions regarding finances and other bankruptcy information. The designated bankruptcy trustee needs to participate in the meeting. He or she will verify the authenticity of all the facts and figures that you declare in your paperwork before submitting it. The debtor should fully understand the consequences of the bankruptcy filing and of receiving a debtor’s discharge.
A debtor’s discharge prevents the creditors who might try to collect debts against you after filing the bankruptcy. Bear in mind that there are specific types of debts such as spousal or child support and some taxes cannot be discharged. Thus, you need to pay them back. If the trustee and the creditor agree and negotiate on supportable grounds, the court will approve the discharge.
Filing for bankruptcy entails hard work and effort. It is a progressive process that will help you solve your financial problems one step at a time. For inquiries and legal bankruptcy advice, do not hesitate to contact us at Orum Young Law Firm and schedule a consultation with our experienced bankruptcy lawyers. Call (318) 450-3192 today.