Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a liquidation proceeding that does not exempt assets. This means that if the borrower has assets, they will be sold by chapter 7 trustee and the process will be distributed to the creditor according to the priorities established in the code. The eligibility to file chapter 7 bankruptcy is usually determined by the means of test that was instituted in 2005 amendment of bankruptcy code.
How to know if you are qualify for chapter 7
When it comes to determining whether you are eligible to file for chapter 7, you must pass something known as mean test. If your average gross income for a period of six months is less than the median that has been put in place by the state, you qualify automatically. On the other hand, if your income actually exceed the median that has been put in place by the state, then you might still be eligible but you will have to deduct certain expenses such as health care premiums, income taxes as well as child care from your gross income.
Chapter 7 usually discharges all unsecured and non-priority debts such as card debt, personal loans, medical bills, lawsuits judgments, past due utility bills as well as income taxes that are more than 3 years old. However, it is very important to note that not all debt will be wiped out. Some of the debt that are not dischargeable include secured loans such as car payment or mortgage, priority unsecured loans such as delinquent family support and fines and penalties that you owe the government and students loans.
Benefits of declaring for bankruptcy under chapter 7
· You are able to get a fresh start. By filing for chapter 7 bankruptcy, you will be exempted from certain debt a factor that will give you a fresh start.
· You will be able to keep future income after filing for chapter 7
· Chapter 7 does not limit the amount of debt
· Discharge of debts occurs quickly
· No repayment plans
· It will ruin your credit for some time to come
· You will lose properties that have not been excepted form bankruptcy trustee
· You will lose all your credit cards