If you are considering filing bankruptcy and looking for information on chapter 7 bankruptcy, there is some stuff that you will need to learn. First and most important of all is those filing bankruptcy need to know the differences between the chapters. One example of this is that Chapter 7 bankruptcy is a liquidation bankruptcy and does not involve any kind of repayment plan like in a Chapter 13. Instead, what happens in a Chapter 7 is the bankruptcy trustee will review all the assets of the debtor and sell any nonexempt property to use the proceeds to pay something to each of the creditors. Another fact that should be considered is to know if you are even eligible for a Chapter 7 bankruptcy. To qualify for Chapter 7 bankruptcy you can be an individual, a partnership, or corporation. Next you will have to qualify under the means test. The means test calculates your current monthly income which is the median income for your state versus your expenses. Basically, you can't have more than around $170 at the end of the month when you pay all of your bills. The primary purpose of a Chapter 7 bankruptcy discharge is to give individuals with large amounts of unsecured debt a fresh start and get back on their feet.
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If you try and file chapter 7 bankruptcy and fail the means test, the United States trustee can dismiss your case or give you the option to convert it to a Chapter 13 bankruptcy. The only way you can stay in a Chapter 7 is if you can convince the bankruptcy judge that you have extenuating circumstances and your bankruptcy is not abusive. Sometimes people get a one-time payment of income like an injury settlement or severance pay and the judge would probably determine that kind of Chapter 7 is not an abuse of the system.
When filing a Chapter 7 petition with the bankruptcy court that is when the proceeding will commence. The person that files that Chapter 7 is referred to as the debtor. The debtor is required by law to show all of their property and debts to the bankruptcy court. The bankruptcy trustee appointed to the case will ask for all nonexempt property to be turned over so they can sell it to equally distribute it amongst all the creditors. Then the debtor will receive a discharge on all remaining dischargeable debts. This procedure can be different for every case because exemption laws vary from state to state.
Individuals that qualify for and file chapter 7 bankruptcy almost always get a discharge. Going in the court presumes the debtor is entitled to be protected by bankruptcy law. Only if a creditor or trustee proves something different by an adversary proceeding will the discharge not happen. Those filing for bankruptcy still need to justify to the court that they made efforts to avoid filing bankruptcy. The discharge is almost always entered unless there is a successful claim of fraud or wrongdoing showing the debtor shouldn't be eligible. It's always important to discuss your case with a local bankruptcy attorney who knows the exemption laws for your state and who can evaluate your personal situation.
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