The Lowdown On A Chapter 7 Bankruptcy Claim

by GuestPoster on November 30, 2010

Filing bankruptcy under Chapter 7 is a means of legally eradicating one’s debts. There are a few exceptions: child support, alimony and federal taxes being some of them. A person cannot get rid of all of their debts if some of those debts cannot be discharges, as in the case of those just mentioned. With a Chapter 7 bankruptcy, any assets belonging to the claimant will be sold and the money derived as a result of the sale will be divided among the creditors to pay back some or most of what is owed to them. Even if your assets don’t cover all the debts, the debts that are eligible for discharging will be once all assets have been liquidated. Creditors will then not be able to pursue you for any balance outstanding.

To proceed with a Chapter 7 bankruptcy claim, people have to apply for and pass a means test to show their monthly outgoings, including debts vs. their monthly income to include any assets, shares, bonds etc. If you fail to qualify for the means test (if your monthly disposable income exceeds $100) you will not be able to make a Chapter 7 bankruptcy claim. In this case, you might have to consider filing for a Chapter 13 bankruptcy claim.

Once you have passed the means test you then need to file a bankruptcy application at your local bankruptcy court and have with you a number of documents to include:

• An accurate list of all your assets and liabilities – a list of all creditors, the type of debt, amount owed etc.
• An accurate account of your monthly income and expenditure – a comprehensive account of the source of income, details of assets, bonds, shares etc.
• A statement of your financial affairs – to include tax details for the last three years, any foreclosures, debts owed, repossessions etc.
• A list of any outstanding leases – for example on an apartment.
• A copy of your most up-to-date tax return.

Another requirement by law is that you apply for a credit counseling course which must be completed within 6 months before making a claim. It costs a little over $300 to file your bankruptcy case and within 4-6 weeks you will be called to attend a meeting of creditors. In or around 4 months after making the initial claim you should receive your notification of the discharge of your debts and will be debt free.

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