Thursday, April 28, 2011

What is Chapter 7 Bankruptcy?

Chapter 7 is the basic bankruptcy.  It is sometimes referred to as the "fresh start" bankruptcy or the "liquidation" bankruptcy.  Chapter 7 bankruptcy does not reorganize or restructure your debt, it eliminates your debt.     Depending on your situation, you may be able to keep homes or cars, but you will still have to pay any secured debts  associated with those assets.  Whether you can keep them or not will depend primarily on whether you are current on the payments, how much equity is in the asset, and what your exemption is.

In order to file a chapter 7 bankruptcy you must "qualify" on the Means Test.  Whether or not you will qualify depends on what your gross income has been for the six months before you file, and your household or family size.  If you do not qualify on the first test, you might qualify on the second test.  The second test is much more complicated and requires a review of your mortgage statements, secured car statements, whether you have back taxes, child support, spousal maintenance, child care, and the like.

Most chapter 7 cases last about four to six months and remain on your credit report for ten years after filing.  The goal is to get a discharge order, eliminating as much of your debt as the law allows.  Certain debts cannot be discharged.  These may include certain taxes, child support, certain marriage dissolution obligations, student loans and judgments resulting from drunk driving actions. 

If you qualify for chapter 7, it may be the best way to get a "fresh start", put most or all of your financial problems behind you, and start over.

Sunday, April 24, 2011

What is bankruptcy?

If you cannot pay all of your bills on time, and you are being harassed by creditors or collectors, you may be asking  "What is bankruptcy?"  Bankruptcy comes in different chapters.  Chapter 7 is the fresh start or liquidation bankruptcy.  Chapter 11 is a large scale reorganizing bankruptcy for individuals or companies. Chapter 12 is the farmer's bankruptcy.  Chapter 13 is a personal reorganizing bankruptcy and cannot be used by corporations or llcs.

In the United States bankruptcy is authorized by federal laws under 11 United States Code. 
Bankruptcy can assist an individual or company to reorganize or liquidate debt. 
Bankruptcy is a creature of law, created by congress for the express purpose of resolving
debt problems that cannot otherwise be resolved.

If you cannot handle your debt, you should consider bankruptcy.  We do not have debtor's prison in the United States so, if you need it,  you should consider bankruptcy.