CHAPTER 7 BANKRUPTCY
The Chapter 7 Bankruptcy Laws are the most common option for people who wish to declare them bankrupt. In fact, when people talk about this subject, it is the bankruptcy as described under chapter 7 of the code of the United States of America. Filing for bankruptcy as per Chapter 7 of Bankruptcy Laws is a systematic procedure. Especially, after the introduction of the new laws in October 2005, now, it has become mandatory for you to pas a Means test and go through a credit counseling process from a government approved credit-counseling agency.
First, you have to pass a Means test, where all your income and essential expenditures are evaluated. The means test involves deducting the day-to-day essential expenditure (the expenses that you cannot live without) from the total income on a monthly basis. It is only if the output is less than the median income of the state, you can file for bankruptcy under the Chapter 7 of US Bankruptcy Laws. However, in case, the output is more than the median income of the state, the bankruptcy court will ask you to file under chapter 13 of the code.
Before you go ahead and file under Chapter 7 Bankruptcy Laws, it is essential for you to go through a credit counseling procedure. The purpose of introducing this step is to evaluate the actual financial situation of the debtor. The credit counseling agency will look into the financial details of the debtor and will try to help the debtor manage their finances and get it back on track, along with paying the debts that the debtor owe to various creditors. If there is any possibility to get the finances of the debtor managed, the debtor will not be able to file for bankruptcy under Chapter 7. In such case, the court will ask the debtor to file under chapter 13 bankruptcy.
When To File Bankruptcy Under The Chapter 7 Bankruptcy Laws
The debtor must file for bankruptcy under chapter 7 in the area where he or she is permanent resident. If the debtor is running a business in a particular area, he or she should file for bankruptcy in its principal place of business or principal assets.
Overall, the main purpose of the chapter 7 bankruptcy laws is to help the debtor to get relief from all the debts that he or she currently owes. In this process, the bankruptcy court appoints a trustee, who further goes ahead with the procedure of liquidating all the assets and properties of the debtor. The money thus collected is then used to settle the claims of the various creditors on priority basis, if any.
The of chapter 7 bankruptcy laws offer an opportunity for the debtors to get a fresh start for their financial life, as the bankruptcy code regarding the same, liquidates all the assets and properties of the debtors after allowing the exemptions, in order to settle the claims of the creditors. This way, the court brings the desired debt relief for the debtor.