How To File Chapter 7 Bankruptcy

When a person wants to understand how to file chapter 7 bankruptcy, there are several steps involved that the lawyer will review with the client, so that a full understanding of the process is realized. First, the person with the financial difficulty should seek out a lawyer that specializes in these types of filings. The attorney will most likely explain the differences between a chapter 7 filing and a chapter 13 filing. Then, all the advice the lawyer gives should be followed exactly and no information should be held back by the client regarding assets owned or creditors owed. The attorney cannot effectively help someone that is not entirely forthcoming about the financial difficulties being experienced at the time. Once a good lawyer has been obtained, then a process of information gathering begins to reveal the clients financial status such as income, property owned, creditors owed, etc. This may be termed as a full financial disclosure.

When learning how to file chapter 7 bankruptcy, the client will learn that a meeting must take place between the person in financial trouble and the creditors in order to give them an opportunity to ask questions about the debts owed. If no creditors object to the debt for statutory reasons, then the petition will be filed and soon after, the discharge will go through. This could be as soon as 60 days or as late as three months, depending on what happens at this meeting. Also, at some point in the how to file chapter 7 bankruptcy process, the client will be asked to go through a credit counseling process and perhaps even a debtor education course, so that the person will have additional knowledge of how to structure personal finances to begin rebuilding the credit rating. Going through the credit counseling will result in the client obtaining a certificate, and it is this document that alerts the creditors not to try to collect on the bad debts or try to take any legal action. Rebuilding a credit rating can take quite a bit of time, so patience is important.

Once the petition has been filed, the creditors that are owed money cannot come after the person who owes the money. This is called an automatic stay from court. Also, there can be no legal action taken against the debtor. Therefore, all those annoying creditor calls will go away. Learning how to file chapter 7 bankruptcy will provide information showing that this procedure is for those owing a lot of unsecured debt such as money owed to credit card companies, unsecured loans and possibly medical debt. This type of bankruptcy may required the person to sell personal property in order to pay off some of the money owed, whereas in chapter 13 bankruptcy, the person may have suffered a financial setback due to a job loss or a long term illness and just needs some time to get back on their feet. For this situation, the chapter 13 filing can provide relief by staying the creditors from legal action and collection, but give the debtor time, over a course of a few years, to pay back the loans or bills. This can help stop any actions to take away a house or possessions. Not participating in the credit counseling can mean the case could be rejected or thrown out.

Learning how to file chapter 7 bankruptcy will reveal that chapter 7 is quicker than chapter 13, because 13 allows the client to utilize current income to pay back creditors, the secured debt first and unsecured after that. The order of payment is set by the US Bankruptcy Code. Filing 13 however also requires completion of a debtors course or the discharge will not be granted. Any unsecured debt that remains after the payment plan has been fully executed and completed will be discharged.

The client considering how to file chapter 7 bankruptcy must understand that a test is given to reveal if the client is even eligible. The debtor must fall between certain limits for secured and unsecured debt. If a person does not qualify for one type of bankruptcy, then perhaps the other type of bankruptcy will be suitable. The test will determine how much income is available to pay the debts after the persons allowable expenses have been deducted. Then the outstanding debt is multiplied by .25. The debtors usable income cannot be over 25% of unsecured debt over a period of five years to pass the chapter 7 bankruptcy test. When deciding a persons qualifications, the debtors income is compared to the state median income. "But I have greater witness than that of John: for the works which the Father hath given me to finish, the same works that I do, bear witness of me, that the Father hath sent me" (John 5:36).

A new bankruptcy law ensures that those who could pay back debt do so. This effectively helps to weed out those seeking unnecessary relief. However, in understanding how to file chapter 7 bankruptcy the debtor will come to know that this law will not preclude most people from filing anyway. If this needs to be done, most likely it will be done and the attorney will probably advise the client to proceed. How to file chapter 7 bankruptcy is not difficult when the process is clearly laid out for the person in need. The individual should just ensure that all processes are followed, all courses and education is taken and all necessary forms are filed in a timely manner. In this way, the entire undertaking will take less time and run more smoothly for everyone.

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