How To File For A Chapter 7 Bankruptcy - Everything You Need To Know

If one is in a dire financial state, filing for Chapter 7 bankruptcy is often the best outcome as it allows one to start afresh. The entire procedure typically takes between four to six months and it begins with filling out and filing some forms, and ends with a meeting with one’s creditors and a court-appointed trustee. Here we set out in detail how the process unfolds.The first step is proving that one qualifies to file under Chapter 7 Bankruptcy. If one’s average monthly income (adjusted for the size of the household) is below the median for the state of residency, then one is allowed to file under Chapter 7. In case the income is above the median, then one has to employ a "means test" to determine whether one has enough disposable income to file under Chapter 13 instead. There are also restrictions in place for those who have obtained a discharge under Chapter 7 in the past eight years (six years in the case of Chapter 13). Moreover, one is not permitted to file if a previous bankruptcy case was dismissed within the past 180 days for reasons such as fraud or violation of a court order.

The next one needs to prepare for all the forms that are a part of the Bankruptcy Filling. One must classify one’s debts into dischargeable and non-dischargeable debts. Most consumer debts are dischargeable. Non-dischargeable debts are most taxes, child support, and student loans. One’s property also needs to be segmented into the exempt and non-exempt property. Exemptions protect certain types of properties by making it unavailable to creditors looking to collect – this helps ensure that one is not left destitute after the bankruptcy proceedings. A well-qualified Chapter 7 Bankruptcy attorney’s legal advice can usually help one optimize for the best possible outcome in such cases.

The bankruptcy courts require the submission of numerous forms such as the Voluntary Petition, and other forms outlining one’s properties, debts and income. Any debt that’s not listed shall not be discharged. This is where one needs to claim an exemption for qualified properties. One also needs to indicate one’s plan for dealing with the secured debt lines – the options range from surrendering the property to redeeming it.

The prepared forms need to be filed with the bankruptcy court clerk. The usual practice is to file all the forms together, one may file only the Voluntary Petition in certain emergency cases. With the filing of the Voluntary Petition, one officially turns over the control of one’s property and debts to the court. Any transfer of property or payment of debt shall now require the approval of the court. Also, upon filing, the "automatic stay" comes into effect and creditors must desist all collection activities.

Upon filing, the court appoints a trustee to administer the bankruptcy estate. Under Chapter 7, the trustee is responsible for gathering the debtor's non-exempt property, managing the funds from the sale of those assets, and then paying expenses and distributing the balance to the owed creditors. Within around two weeks of filing, a notice of a creditors meeting is sent out. This meeting is chaired by the trustee and questions may be asked about one’s paperwork and financial condition. Although creditors are permitted to attend this meeting and ask questions, they usually tend not to show up.

After the creditor's meeting, the trustee and the creditors have sixty days to express their objection to discharge by filing a suit in the bankruptcy court. If no such objection is expressed, the court releases an order discharging one’s debts. For free consultation visit Dsouza & Strachan Group.

James is a professional content writer at Dsouza & Strachan Group who specializes in Bankruptcy filing.