Chapter 7 is the most common chapter of the bankruptcy provisions in the United States.
Chapter 7 bankruptcy is a liquidation, or straight, bankruptcy and is used by individuals (other chapters are for businesses, farmers etc).
Any person who has a business in, owns property in, or lives in the United States is eligible to file chapter 7 bankruptcy; however, it is possible for some people to be ineligible for bankruptcy protection, or will be ineligible for chapter 7 protection, and will have to file for chapter 13 bankruptcy instead.
When a debtor files chapter 7 bankruptcy, all of their property that is not exempt from seizure in bankruptcy will be liquidated to pay the debtors' creditors.
While a chapter 7 bankruptcy will stay on your credit report for ten years, if you are in a position to be filing chapter 7, your credit is already as damaged as it can be.
A chapter 7 bankruptcy provides a new start and an elimination of all of your eligible unsecured debts (some debts are not eligible to be erased) Some of the debts that will survive (not be wiped out by bankruptcy) a chapter 7 are mortgage and car payments, child/spousal support payments, judgments against you (such as damages against you awarded in court) and back taxes less than three years old.
Student loans cannot be discharged unless the debtor can prove that repaying them would be unduly hard.
The chapter 7 process will cost $295 (plus lawyer fees) and take from four to six months.
During and/or before the bankruptcy case you must take a financial education course, and two credit counseling courses.
When you are filing chapter 7 you are allowed to keep some property or assets.
The Bankruptcy Abuse Prevention and Consumer Protection Act was passed by Congress in 2005 to prevent people from filing bankruptcy when they could repay their debts.
The Act provided the means test, which shows whether a person is a genuine candidate for bankruptcy or not, by comparing the average income of the state to the persons' average income; when the debtor has an average income that surpasses the states' average income, the means test is used.
The means test is applied by taking the debtors' average income and subtracting presumed expenses.
This equation will show whether the debtor is eligible for chapter 7 (if not, you will have to file chapter 13 bankruptcy).