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Chapter 7 Bankruptcy

Regardless of the state of the national economy, individuals and businesses may struggle with debt and other financial problems at any time. Many factors can cause or contribute to financial issues, including reduced cash flow for a business, lost income for individuals, lawsuits and judgments, back taxes owed to the state or federal government, medical bills, and lack of available credit.

If you are struggling to meet your financial obligations as an individual or business owner, help is available. By working with an experienced bankruptcy attorney, you can relieve your current stress and move on to a brighter financial future.

A Method for Reducing or Eliminating Debts

Filing bankruptcy can serve as an effective means for reducing the amount you must pay creditors or even completely eliminating your debts. For individuals, bankruptcy can reduce or eliminate your financial obligations while allowing you to keep your home, car and other assets. In addition, your income may be protected against garnishment, and your retirement accounts are safeguarded.

Businesses can use bankruptcy to eliminate unfavorable contracts and leases, to reduce the balances owed to vendors, and to extend payments for back taxes — providing an opportunity to return to profitability.

In a Chapter 7 bankruptcy, the trustee sells the nonexempt assets of the individual or business filing bankruptcy and uses the resulting funds to pay claims from creditors. Bankruptcy law allows filers to keep certain property.

Chapter 7 Bankruptcy Process

Numerous documents are involved in the process of filing for Chapter 7; your bankruptcy attorney will assist you in completing and filing the proper paperwork with the bankruptcy court. Required documents include:

  • A voluntary petition for relief.
  • Lists of your assets and liabilities.
  • Declarations about debtor education.
  • A statement about your financial matters.

Declaring bankruptcy will mean disclosing the details of your financial status to the bankruptcy court — including all your property, income, expenses and debts. You’ll pay a filing fee to the court along with providing the appropriate documentation.

To be approved for a Chapter 7 bankruptcy, you’ll also be required to pass a means test. The calculation is part of the bankruptcy code and determines whether you can afford to pay your debts. If you don’t pass the means test, the court might require you to instead file for Chapter 13 bankruptcy, which implements a payment plan rather than reducing or eliminating your debts.

Once your paperwork is filed, the bankruptcy court will schedule a Meeting of Creditors. Any of your creditors may appear at that time to ask questions about your finances and your bankruptcy filing. If neither your creditors nor the bankruptcy trustee object to your bankruptcy filing, the court will automatically provide you with a discharge sometime after the deadline for objections.

During the bankruptcy process, the trustee can seize your nonexempt property and sell it. The law provides exemptions on what property can be seized; for instance, your retirement accounts should be protected.

Eligibility for Chapter 7

Individuals, partnerships, corporations and other businesses can file for Chapter 7 bankruptcy protection. Eligibility is not limited by the amount owed to creditors, but it is limited according to the means test, which determines the ability of the debtor to pay.

Individuals are prohibited from filing if they’ve had a previous bankruptcy petition dismissed in the past 180 days because of intentionally failing to appear in court or failing to comply with the court’s orders. In addition, you will not be allowed to file if you voluntarily dismissed a previous bankruptcy filing because your creditors attempted to recover property with liens through the bankruptcy court.

In addition, prior to filing for bankruptcy, you must receive credit counseling from an approved agency. The requirement can be waived in certain situations, including emergencies.

Discharge of debts by the bankruptcy court is only available to individuals. Even for individuals, property liens are not canceled, and some types of debts are not included in discharge.

Learn About Your Options

Bankruptcy is not the best way to resolve financial problems in all situations. When you owe relatively small amounts or you have only a few creditors, a workout may be a better and faster way to settle your debts. Your attorney can work with creditors to reduce what you owe and to allow you to make your payments over a reasonable, manageable period of time.

Gertler Law Group, LLC, has represented individuals and businesses of all sizes in virtually every type of bankruptcy. Our contact Gertler Law Group, LLC.