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Chapter 7 Bankruptcy Made Simple
Chapter 7 bankruptcy can eliminate many debts, including credit cards, medical bills and unsecured loans.
September 04, 2011 /Law and Legal PR News/ -- Chapter 7 Bankruptcy Made Simple
The federal government regulates bankruptcy under laws that are organized into several chapters. Bankruptcy generally falls into two categories:
-Liquidation, in which the bankruptcy filer has all property not excused by state and federal law sold off to pay creditors
-Reorganization, in which the bankruptcy filer makes a plan to repay debt in installments over three to five years, which can lower monthly expenses
The former is a Chapter 7 bankruptcy, and the latter is a Chapter 13 bankruptcy. You should consult with a bankruptcy attorney to determine which one is right for you.
In order to qualify for Chapter 7 bankruptcy, a filer has to pass the "means test." The means test is a comprehensive evaluation of all income and expenses to make sure that you cannot pay off your debts. If your income is below the median for your area and family size, you will be able to file for Chapter 7 bankruptcy. The median income depends on your state, and often state laws will govern what property is exempt from liquidation.
The benefits to Chapter 7 bankruptcy include:
-A discharge (elimination) of unsecured debts
-An "automatic stay" -- meaning creditors have to stop collection activities, including foreclosure proceedings and wage garnishments
Types of Debts Discharged Through Chapter 7
Common types of unsecured debt that are discharged in Chapter 7 bankruptcy include medical bills, old cell phone and utility bills, and credit cards. This can occur in as soon as two or three months after filing. Secured property is property that the creditor has a lien against. Liens are legal devices by which creditors can take and sell property if the debtor stops paying. For most filers, this includes home and auto loans. This makes it difficult to keep your home in a Chapter 7 bankruptcy.
Additionally, some debts a Chapter 7 bankruptcy won't eliminate. These include:
-Alimony and child support payments
-Some kinds of taxes
-Government loans, such as student loans
-Debt from injuring or killing someone while driving drunk
The goal of bankruptcy is to allow a person the ability to continue working and living without the pressure and harassment caused by overwhelming debt. If you are considering filing for bankruptcy, consult a bankruptcy attorney immediately.
Article provided by Kratter & Gustafson LLC
Visit us at www.laws4ct.com
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