Bankruptcy is a court proceeding in which a debtor declares his inability to repay the creditors. A trustee is appointed to liquidate his assets and pay off the creditors. Chapter 7 bankruptcy also known as “liquidation bankruptcy”, converts the assets into money. Majority of the debtors opt for liquidation bankruptcy. The main objective of filing for bankruptcy is to help a person overcome financial crisis and make a fresh start financially. Only non-exempt assets are liquidated to pay off creditors. Once a person hands over the assets to the trustee, he loses the right of giving away or selling the property.
When a person files Chapter 7 bankruptcy, an “Order for Relief” comes into effect. It is also known as an “automatic stay”. This stay prevents creditors from harassing a person for debt collection. So, his wages remain safe from being garnished. The creditors are also not allowed to take away the debtor’s car or property.
The New Federal Bankruptcy Laws that came into effect on 17th October 2005 have made filing for bankruptcy very stringent. As per the new law, a person has to undergo a “Means test”. In Means test, the debtor’s earnings is calculated and compared to the average income of a same-sized household in New Jersey. In case it is found that the current earnings is less than the median income, the person qualifies for Chapter 7 bankruptcy. The total time to get out of debt with Chapter 7 bankruptcy is roughly 4 months to 6 months. When a person opts for bankruptcy, he has to pay the “filing fee” to the clerk of the court. This is in addition to the cost of hiring an attorney. If a person is planning for Chapter 7 bankruptcy, the amount he has to shell out is USD$ 299. The step-by step process of Chapter 7 bankruptcy is as follows-
* The debts of a person are analyzed
* Asset exemptions are noted
* The person takes the means test to see whether he qualifies or not
* The person can either reaffirm or redeem his secured debts.
* The person files for bankruptcy
* He files objections if necessary
* He wraps up his secured debts
* His debts get discharged
If you want to get more information on Chapter 7 bankruptcy, log onto www.peterzimnislaw.com. This reputed law firm has a team of experienced attorneys who will help you go through the bankruptcy procedure easily. Their charge is also affordable. Contact them today.
By janjf93 from Pixabay