Chapter 7 bankruptcy is definitely the magic bullet when you are overwhelmed by debts. This is because it relieves you from the burden of having to clear the loans with your future earnings. However, filing for bankruptcy can’t save you from the trouble of having to pay tax or child support. In a nutshell, chapter 7 bankruptcy means that all your assets have to be sold so that your creditors can recover the money that you owe them. Continue reading below to learn more about how you can go about this type of bankruptcy.
- The Paperwork
To most people that have never had sleepless nights due to debts, filing for chapter 7 bankruptcy might sound like a walk in the park. But it’s not. For a start, there is a lot of paperwork that has to be done. When you are applying for this type of bankruptcy, you are required to submit all your financial records including bank statements, credit card statements, loan documents and pay slips. You are also supposed to draft a petition that indicates why you are not in a position to pay the pending debts and submit it in a bankruptcy court. The petition must indicate the people that owe you money (debtors), those that you owe (creditors), income and expenses. And since the paperwork is complicated, it’s advisable you involve an experienced Philadelphia bankruptcy attorney to increase your chances of success.
- Credit Counseling Session
Before the application of chapter 7 bankruptcy is approved, the applicant must be engaged in a counseling session with a certified financial counselor. This is done to find out whether the applicant can be assisted without having to liquidate his assets. Moreover, it’s known that there are many people who blindly apply for bankruptcy without doing a thorough analysis of their situation. The counseling session can be conducted in either a government office, over the internet or over the phone. You therefore don’t have to go for the session in person. As long as you can be reached the phone, the counselor will be able to initiate some possible solutions.
- Means Test Calculation and Summon of Creditors
After you have expressed an interest in filing for bankruptcy, you will be given a means test. It’s basically a document that outlines your earnings ad compares them with minimum income for your state. If your earnings fall below your state’s minimum income, it means that you will not be able to settle your debts in the near future. Once you have passed the means test, the court appoints a trustee that will be managing your assets until all debt is cleared. Your creditors are also summoned in the court to allow the appointed trustee to clarify the basic details of every creditor.
- Liquidation of Assets
When the application of chapter 7 bankruptcy is approved, the appointed trustee is allowed to sell your properties and pay the creditors. However, what remains after the creditors have been settled can be deposited into your bank account. This guarantees that the creditors can’t get more than what you owe them. In addition to that, the trustee can’t touch your retirement benefits. If you wish to object the decision of the court, you are allowed to file an appeal within 60 days.