When you decide to file for bankruptcy protection as the right solution for your financial troubles, you need to decide on the type of bankruptcy that is most suited for your situation. If you are an individual, then your best bet will be chapter 7 or “liquidation” bankruptcy.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy allows you (as a debtor) to eliminate your personal liability for most types of your debts and to receive a fresh start. This implies that if you have assets that are not protected by an exemption, an appointed trustee may be allowed to sell all your assets and distribute the proceeds to your creditors based on the priorities set in the bankruptcy Code. In exchange, you get a discharge of personal liability for most of your debts.
Who Is Eligible For Chapter 7 Bankruptcy?
Eligibility for Chapter 7 bankruptcy is usually determined by a “means test” stipulated in the 2005 bankruptcy code amendments. Although some higher earning individuals may not qualify for Chapter 7, especially if their debts are primary consumer debts, experienced bankruptcy lawyers can always assist.
Petition and Filing Requirements
Chapter 7 bankruptcy begins with you filing a petition with your state’s bankruptcy court (the court serving the area where you live or where your business is located). Besides the petition, you are required to the file with the court:
· Your schedules of assets and liabilities
· Your schedule of current income and expenditure
· Your schedule of executory contracts as well as unexpired leases
· You may also be required to provide the appointed trustee with a copy of your tax return or your most recent tax year transcript as well as a copy of your tax returns filed during the bankruptcy case.
If you are an individual debtor with primary consumer debts, additional documentation may be needed:
· Evidence of payment from your employers received 60 days before you filed for bankruptcy
· Credit counseling certificate or a copy of any loan repayment plan that you developed through credit counseling.
· Statement of monthly net income or any anticipated increase in income or expenses after filing for bankruptcy
As aforementioned, if you are an individual, Chapter 7 bankruptcy is the most suited bankruptcy to file for. It is the simplest and quickest type of bankruptcy and is not only available to individuals, but to also to married couples, partnerships and corporations. What is more, in most of the individual bankruptcy cases in the United Sates, the appointed trustees close the cases without selling debtor’s assets.