With 2012 now behind us and 2013 here, many people are looking at ways to get a fresh financial start in the New Year. For the millions of people that are buried in debt Chapter 7 Bankruptcy is a leading choice to make this happen. Chapter 7 Bankruptcy, or liquidation bankruptcy as it is sometimes referred to, is a quick way to eliminate unsecured debt. Chapter 7 Bankruptcy can be filed by individuals as well as businesses. The ultimate goal of filing Chapter 7 Bankruptcy and the reason why Congress created it is for the honest hard working American to gain a fresh start by eliminating overwhelming debt.
A typical Chapter 7 case takes about three to six months from beginning to end. I t however begins with the actual filing of the bankruptcy petition at the bankruptcy court. The bankruptcy petition must include a detailed accounting of the debtor’s income and expenses. Proof of income is required by the court in the form of bank statements, pay stubs, and tax returns. All assets and personal property must be listed. A complete list of the debtor’s creditors must also be included so that they might be notified of the bankruptcy case by the court. This part of the bankruptcy case is usually the most tedious and involved for the debtor as much detailed information is required and the petition must be filled out accurately to avoid the case being dismissed. If the debtor has any doubts it is best to hire a bankruptcy attorney to prepare the Chapter 7 Bankruptcy case to ensure that the case goes smoothly from beginning to end.
In the Chapter 7 case some of the debtor’s property may be sold by the trustee so that the proceeds can be divided and allocated to the creditor’s to pay down some of the debt. The debtor in return gets the remaining unsecured debts eliminated or erased. This is the “liquidation” aspect of Chapter 7. It is not very common for a debtor to have personal property or assets liquidated in their Chapter 7 Bankruptcy. This is due to exemption laws which are bankruptcy laws that allow a debtor to keep a certain amount of property that is deemed exempt. The property that the debtor is allowed to keep, or exempt, in the Chapter 7 bankruptcy is determined by the specific exemptions indicated under state law. Bankruptcy exemption laws vary from state to state with some states allowing for more generous exemptions to debtors than others. However, the debtor must file bankruptcy in the state that they reside in. This is another good reason to have the help of a bankruptcy attorney. Bankruptcy attorneys are very familiar with their state’s exemption laws and can use them to the fullest to protect the maximum amount of personal property for their client. The attorney may even feel that it is more beneficial for their client to use federal exemptions rather than the state exemptions to protect the most for their client. Also, if the debtor owes money on a secured debt like a car or a home, the debtor can choose to give up the property in the bankruptcy case and walk from it free and clear with no financial obligations to the lender. The debtor can also choose to keep the property in the bankruptcy case as long as they can afford to continue making the payments and the lender agrees.