In general, bankruptcy options are available to help protect individuals from overwhelming debt. Chapter 7 bankruptcy is one option for individuals who qualify under the means test that can help them enjoy debt relief and a fresh financial start and future. Chapter 7 bankruptcy allows an individual filing for bankruptcy to eliminate debts by liquidating non-exempt assets to repay them.
Though Chapter 7 is a liquidation bankruptcy process, some assets are exempt from the bankruptcy process during a Chapter 7 bankruptcy. Exempt assets are assets that fall into certain categories, or a wild card category for assets that do not fit into other categories or exceed the limit allowed, and are subject to certain limits. The Chapter 7 liquidation bankruptcy process begins with the filing of a bankruptcy petition. Once the filing party has filed a bankruptcy petition, and automatic stay goes into effect that protects the filing party from collection actions by creditors while the process proceeds.
Following the filing of the Chapter 7 bankruptcy petition, the filing party must provide the bankruptcy court with a schedule of assets and liabilities; a schedule of current income and expenses; a statement of financial affairs and information concerning any executory contracts or unexpired leases. Additional requirements also apply depending in the filing status of the filing party, for instance, as a consumer or otherwise. The next major step in the process is the meeting of the creditors, and the final step in the process is ordinarily a discharge of the filing party’s debts.
The Chapter 7 bankruptcy process includes many important details at each phase of the process, so it is necessary to be educated concerning what the overall process includes. It can be worth it, though, for individuals struggling with overwhelming debt to be familiar with the bankruptcy protections and resources available to them to help them enjoy debt relief.
Source: Bankruptcy.findlaw.com, “Chapter 7: How it Works,” Accessed Nov. 29, 2016