Chapter 7 Liquidation
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Chapter 7 Bankruptcy cancels all your debts. Yet you may also have to sell all your property.
In a Chapter 7 Bankruptcy, a trustee is appointed by the court, and they are responsible for selling or liquidating your estate at government auctions, and all the proceeds will be distributed amont the creditors. Once most of your assets has been liquidated, you finally be discharged by the court. No matter how bad it sounds, we should all admit that for the past decades, most people had been taking advantage of the debt-discharge to meet with their lavish activities bringing them into debt. Keep in mind, the new bankruptcy limits those who can qualify for a Chapter 7 bankruptcy.
Those filing for bankruptcy must go through a “Means Test” in order to prove that they are unable to pay their debts. The debtor should be able to prove that their income is lower than the family median before opting into the bankruptcy program. Failure to meet this condition would require these debtors to have a repayment of some of their important debts (after revealing they actually can) instead of being completely relieved (‘discharged’) from most or all of it. A person is not qualified to file for chapter 7 bankruptcy if they have recently filed one during the past 6 to 8 years. The debtor is required to file for the reorganization or repayment plan if they fail to pass standard eligibility requirements.
In order to be qualified, the debtor must complete the credit counseling course, as well as accomplish a two page petition, and present the certificate to the bankruptcy court and creditors for evaluation. Within these bankruptcy forms, the debtor must give details about his property, current income and its sources, monthly living expenses, other debts, and any type of property that he owns (including exempt properties).
Most state bankruptcy courts also allows filers to keep equity in home, clothing, household furnishings, unspent Social Security payments, and other necessities such as a car and the tools of trade, property owned and money spent during the previous two years, and property sold or given away during the previous two years. The qualified bankrupt is then protected by an automatic stay as well as limited by it. Since he has already technically placed his property and the debts in the hands of the bankruptcy court, he can’t sell or give away any of the property he owns or pay off his pre-filing debts without the court’s consent.
Once the debtor has been discharged from the Chapter 7 Bankruptcy process, all non exempt debts will be cleared away. Keep in mind, this does not include child support, student loans, and other tax debts in place. Understand that getting a mortgage after bankruptcy will also be difficult in the near future.