Breaking It Down: What Is Chapter 7 Bankruptcy?

Simply put, Chapter 7 bankruptcy can be defined as a procedure in which an individual in severe financial distress can eliminate all or some of their debts. It takes about six to seven months to go through the entire process.

Filing Chapter 7 Bankruptcy Involves

• Filling out all of the necessary forms
• Being present in meetings with creditors and a trustee appointed by the court and having some or all of your debts cleared
• There may be additional filing fees and attorney fees that vary with each case
• There are bankruptcy exemptions in place that protect certain types of property so as not to leave you destitute

The Process: Filing Chapter 7 Bankruptcy

The first step is to determine your average monthly income for the six months before filing for bankruptcy. You are allowed to file Chapter 7 as long as your income is under the median income of the state you live in. If you are above the median income, you have to take the means test to see if Chapter 13 would be a better solution. This is a form that compares your income to the debts you have. It determines if you have the necessary disposable income to pay some or part of your unsecured debts over the next three to five years. Before filing, you have to complete a credit counseling program in the prior six months with a court-approved agency. There is a fee that may be waived if you meet low-income requirements.

Along with the Voluntary Petition form, you have to fill out various forms outlining your income, expenses, property, and debts. Make an accurate list of your creditors and their mailing addresses. You have to indicate the property that is exempt and how you plan to deal with secured debts.

The Automatic Stay

Once you file all your forms, you have officially given control of your property and debts to the court. This also activates the automatic stay, which prevents your creditors from taking any action to collect any debt from you. The court trustee makes sure that your creditors are paid as much as possible to satisfy your debt. After a meeting with the creditors, the court may discharge your unsecured debts within 60 days.

Chapter 7 Bankruptcy is the best way to relieve all your qualifying debts. It allows you to start again from your existing financial condition. If you would like to know if you can file bankruptcy, contact a Houston bankruptcy attorney.