The bankruptcy laws as defined in the bankruptcy code of the United States have been categorized into various chapters and one of the most common types of bankruptcy is chapter 7 bankruptcy. The concept of bankruptcy that a common man has is the concept described in the chapter 7 of the bankruptcy laws.
What Is Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the option for the debtors to get rid of all the debts that they owe to various creditors. In this method, the bankruptcy court appoints a trustee to liquidate all the assets of the debtor and settle the claims of the creditors with the money thus collected. The advantage to the debtor is that he or she is now responsible to pay as much debt as is the value of their assets. They will not have the obligation to repay the debts that could not be paid with the money collected from liquidation of assets.
That is the reason most people who have caught themselves in too much debts to be paid off with the means and assets available to them look at chapter 7 bankruptcy as an attractive option. It provides them an excellent opportunity to give their financial life a fresh start with no obligation to repay the debts they owe.
Is Chapter 7 Bankruptcy Easy To Be Granted For The Debtors
Whether or not the chapter 7 bankruptcy is easy for the debtors depends upon the specific bankruptcy case. However, in order to prevent bankruptcy frauds, the bankruptcy laws require the debtors to go for a Means test before they are declared as bankrupt. The objective of the means test is to compare the debtors monthly income to that of the states median income. If the debtors monthly income is greater than the state’s median income, he or she is not granted bankruptcy under chapter 7.
Rather they are asked to file for bankruptcy again under chapter 13 where they will be suggested a repayment plan to pay off the debts along with the opportunity to reorganize their finances under the expert guidance of the trustee appointed by the bankruptcy court. Therefore, it is very important for you to check out everything before you file for chapter 7 bankruptcy. I must add that converting the bankruptcy claim from one type to another will require you to pay the conversion fees, which is substantial in nature.
Therefore, the prudent way is to let your bankruptcy attorney be aware of all the facts so that they could help you find the best possible solution.