How Does Chapter 7 Bankruptcy Help You Get Rid Of Debt

2019/02/25

In the present period of time where the economy has been hit and where job markets fluctuate with the blink of an eye, many people are increasingly finding themselves in financial trouble. Jobs are still being lost and the cost of living is on an upward spiral.

Many people find themselves overwhelmed with debt because of losing their jobs, and they find that creditors who were very good to them at one point of time have stepped up the pressure on recovering their dues, to a large extent. If you find yourself struggling under the burden of debt and if you have no way to deal with it on your own, do not despair. A solution to this is available, which will help you clear your debts and start off afresh.

If you find yourself under extreme debt, you have an option under Title 11 of the United States Bankruptcy Code in order to help you get rid of your debt by selling any non-exempt property that you might have, and then using the funds to pay up your debts. This is known as Chapter 7 Bankruptcy, and is one of the most common forms of bankruptcy that is being filed these days.

When you opt for Chapter 7 Bankruptcy, the court will appoint a trustee to whom you would need to hand over all your non-exempt property. This will then be sold by the trustee and your debts will be repaid, and usually takes around four to six months for the entire court process to be complete. The primary purpose behind Chapter 7 Bankruptcy is to help a debtor out of financial obligations that are just beyond his ability to pay.

Eligibility Criteria

Not everyone can file for Chapter 7 Bankruptcy. If you are overwhelmed by debt and wish to file for this type of bankruptcy, then it is compulsory that you need to meet the following criteria.
1- you should be a person whose income is much lower than the average income of the state.
2- you should be a citizen or resident of the United States of America.

All debts cannot be discharged by filing for Chapter 7 Bankruptcy. Among the debts that can be discharged are negligence claims, auto accident claims, leases, judgements, business debts, guaranties, credit cards, repossession deficiencies and personal loans. There are also some debts for which this type of bankruptcy will not be approved.

You cannot file for Chapter 7 Bankruptcy in cases of recent taxes, student loans, trust fund taxes, unscheduled debts, fraud debts, criminal fine, child of family support, restitution, debts that have occurred as a result of drinking and driving, penalties that are owing to the government, cases of auto accidents which were caused as a result of you drinking and driving, or cases in which you had already applied for bankruptcy for your debts, but a discharge was denied. Therefore, take time to first evaluate as to what sort of debts you have, before deciding to go with Chapter 7 Bankruptcy.

Fees Associated With Filing For Chapter 7 Bankruptcy

When you file for Chapter 7 Bankruptcy, you will have the following charges associated with it:
$245 – Mandatory fee to file the case
$39 – Miscellaneous administrative fee
$15 – Trustee surcharge

While these fees are generally supposed to be paid in one single instalment, there are unique cases in which the court may allow you to pay this in instalments. If you absolutely cannot afford these fees, you also might be given a fee waiver. However, if the court does not grant you a waiver or if it does not allow you to pay in instalments, and if you do not pay the fees to the clerk of the court, then your case might be dismissed. Therefore, be prompt in paying your fees.

The Process of The Case After Filing For Bankruptcy

Once you have filed for Chapter 7 Bankruptcy, almost all collection proceedings against you will be stopped. An “Order of Relief” will be issued, which ensures that as long as this order is in effect, your creditors cannot try to make you repay them. Your creditors will also receive a notice stating that you have filed for bankruptcy. However, if you have any secured debts, then you can expect your creditors to still make collection attempts for pending payments. If your creditors continue to harass you after they have received the notice, then the court could order them to pay your attorney’s fees.

The next step with be the “314 Hearing” which is a meeting of your creditors with you and the court appointed trustee. You will need to be present at the meeting and be honest in answering all questions pertaining to your financial status and inability to pay your debts. The trustee also plays the role of ensuring that you understand the entire process of Chapter 7 Bankruptcy, and that you also understand the end result of the entire process.

After the Meeting of Creditors is over, your trustee will inform the court as to whether your case is valid enough to be discharged. The final part of the proceedings is when the court gives you a written notice stating that all dischargeable debts have been discharged.

Points To Remember About Chapter 7 Bankruptcy

While filing for Chapter 7 Bankruptcy is beneficial if you have absolutely no way in which to pay back your loans, it can also affect your credit report for the next ten years. Therefore, you need to give this a lot of care and attention, and filing for bankruptcy should not be the first option you choose in case you are overwhelmed with debt. While you would want to, of course, discharge all your debts and start off with a clean slate, you need to get all the basics right first.

Consult with your attorney before taking any step. He might, in certain situations, feel that you need not take as big a step as filing for Chapter 7 bankruptcy and might suggest another form of debt relief in case he does not feel that it is safe for you to file for this. Therefore, get all facts right before filing for Chapter 7 Bankruptcy.

Photo Credit: Filingbankruptcyok.com

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