File Chapter 7 Effectively

Bankruptcy is seen as a last resort to solve financial troubles due to the fact that it wipes out the credit rating for some years to come. There is also a stigma attached to the process, typically one of failure. Filing is not necessarily saying that you are a failure at being able to pay your debts, but rather one of making a business decision to eliminate debt you can not pay and start over again. To that end, you are going to file a consumer bankruptcy and under one of the two most commonly used chapters, 7 and 13. Many would rather file Chapter 7 because it’s relatively brief and gets the process done with quickly.

Some think that they can file Chapter 7 and come out relatively unscathed in terms of asset loss. This is true, to a degree. Filing any form of bankruptcy requires that an attempt be made to pay back creditors, even if it is just pennies on the dollar. In Chapter 7, this is done through liquidating assets. If you have assets that have value in them, the court can take and sell them in order to satisfy your creditors. However, it is possible to file in this chapter without losing much, if anything, at all, but it depends on your situation.

Before you file Chapter 7, you have to go through and fill out what feels like a mountain of paperwork. You start with the means test and end with the petition. The means test is important because it’s what is used to determine which chapter of bankruptcy you are eligible for. If it so happens that you do not have much money left over at the end of the month, you are able to go through a Chapter 7 and not worry about a Chapter 13.

After the means test, you fill out the petition to voluntarily ask the court for relief from your debts. You have to fill out every form and schedule to the best of your knowledge, and declare that everything you have entered is true. Lying during a bankruptcy gets your petition thrown out and you are banned from filing again in that particular court district. Resist the urge to lie about a valuable asset. You can always negotiate to buy it back from the court if the trustee decides to claim it for liquidation.

When you fill out the petition, you have the right to exempt assets using your state laws of exemption. This is where many people manage to keep their assets because they have nothing of value. A car that has a loan against it has no value either, and you can reaffirm the loan if you want to keep the car. Each person’s situation is going to be different from the next, so what applies to one may not apply to another.

A Chapter 7 typically closes within four months from the filing date, and is known as a discharge. Getting discharged means your debts are wiped clean, and you can start rebuilding your finances without stress from creditors.

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