Chapter 7 bankruptcy is the easiest form of bankruptcy to understand and also the most widely used. In Chapter 7, if the debtor has assets not protected by an exemption, a court appointed trustee may sell the assets and distribute the proceeds to creditors according to the priorities established in the Code.
Then, the debtor will not assume responsibility for most of his/her debts. In almost 99 percent of individual bankruptcy cases, the trustee closes the case without selling anything that belonged to the debtor. Read more to learn about who can file Chapter 7 and how to file for it.
An individual’s eligibility to file Chapter 7 is determined by the means test instituted with the 2005 amendments to the bankruptcy code. People with too much income often do not qualify for Chapter 7. With the help of experienced bankruptcy lawyers, most people who want to file Chapter 7 can do so. Chapter 7 is available to an array of parties, including: married couples, corporations, individuals and partnerships.
The case is begun by filing the official petition, schedules and statement of financial affairs. These forms prompt you to list all of your assets and all of your debts, along with some recent financial history. This is the most important and most time consuming part of a bankruptcy filing
It is important that every creditor is listed in the schedules with an accurate mailing address. You must list all of your debts, even if the debt is nondischargeable or if you intend to reaffirm the debt. The schedules also list your property, any debts secured by that property, and the sale value of the property. “Property” here means “assets” or “possessions,” not just real estate. Your choice of exemptions is made on one of the schedules. The schedules are signed under penalty of perjury. False or recklessly inaccurate schedules can prevent you from getting a discharge.
The bankruptcy clerk for the area in which you live will schedule your bankruptcy schedule. For most purposes, the rights of the debtor and the creditors are those that exist on the day the case is filed. All of the hearings and case proceedings will refer to the bankruptcy and subsequent debt as if it had just happened.
The automatic stay goes into effect upon filing the petition, creating a legal barrier to collection actions by creditors. The court will first refer a trustee and then it will be the job of both the trustee and the debtor to contact all those seeking repayment. They will obtain a schedule at the same time you do.