Chapter 7 Bankruptcy and How It Works


For many individuals making the decision to file for bankruptcy is the most difficult step they will have to make in the process. Once they have finally arrived at the decision to file bankruptcy, they will have to examine their bankruptcy options. Not everybody will qualify for a Chapter 7 bankruptcy; those that don't can usually file a Chapter 13 bankruptcy instead.

Which bankruptcy is Chapter 7? Chapter 7 is the liquidation bankruptcy. If you have an excess of assets you may need to liquidate those assets in order to pay off your debts. The remaining debts will be discharged through the bankruptcy.

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If this idea worries you - you don't need to be overly concerned. There are a number of exemptions for personal property that might protect your assets from liquidation. In fact, a large percentage of Chapter 7 filings are either covered under the exemptions or, the filers don't have any assets to turn over.

Chapter 7 is ideal for people who either don't have a regular job or don't have a steady source of income. Anyone who files for bankruptcy will have to submit to a bankruptcy means test. The means test compares your income for a household of your size to the median income of your state. If your income is below that figure - you automatically qualify for a Chapter 7. If your income is too high - your bankruptcy attorney will apply a standard formula that calculates allowable exemptions. If you still don't qualify for a Chapter 7, you will be diverted to filing a Chapter 13 bankruptcy instead.

Chapter 13 bankruptcy is a debt reorganization bankruptcy. With a Chapter 13 bankruptcy you pay off either all or a portion of your debts over a period of time. These payments are made over a period of three to five years at an amount you can comfortably afford.

You're probably curious as to what kinds of debts can be included in a Chapter 7 bankruptcy. First off, the debts that cannot be included in bankruptcy include child support, spousal support, student loans, court-ordered fines (e.g. traffic tickets), certain taxes (less than three years old) and victim restitution.

What can be included in Chapter 7 is unsecured debt such as: credit card debt, medical bills, utility bills, personal loans, and certain taxes (more than three years old). This can be extremely good news if you owe thousands of dollars in medical bills or credit card debt.

Chapter 7 bankruptcy is the simplest and quickest form of bankruptcy available. It can usually be completed within three to five months. In fact, many people think it's too good to be true - but it is not! It's real and it can offer much needed relief to individuals and families who are suffering from out of control debt. If you are contemplating bankruptcy - the best thing for you to do is contact a qualified bankruptcy attorney in your area.

Your lawyer will be able to sit down with you and listen to your situation. It should only take them a few short minutes to tell you what your best plan of action should be. They will be able to present your bankruptcy options or alternatives in a manner which you can easily understand. Calling an experienced bankruptcy lawyer will be the first step in reclaiming control over your finances!


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