Bankruptcy Blog For You

This is also known as liquidation bankruptcy. It is a process through which a debtor is subjected to pay of the remaining debts by selling some of his or her belongings which are not protected under the bankruptcy law. It is a very fast process as it takes only four to six months to finish.

Not every defaulter can file for Chapter 7 bankruptcy. There are certain criteria which are to be analyzed for filing Chapter 7 bankruptcy. One of the important eligibility criteria is “means test”.
Through means test Internal Revenue Service judges whether a defaulter is eligible to go for Chapter 7 or not. In this case if the income of a person is less than the average income of the other person with a same family size in the state where he or she is residing, the defaulter can file for Chapter 7 bankruptcy. Otherwise the court will find the best available option for that person. The other eligibility criteria required to be judged are:


.Enrollment in a credit counseling session within six months before filing bankruptcy

.No Chapter 7 bankruptcy discharge within past eight years or Chapter 13 within past six years

.No bankruptcy dismissal within past six months due to failure from the defaulter’s part to appear before court or follow court orders.

The possessions those are required to sell to pay off creditors are mainly liquid assets. But it is required to give a list of all the assets to the trustee and on the basis of the list, trustee will judge which asset to sell. But there are exemptions on certain assets as per bankruptcy Chapter 7 law. Assets like pensions, retirement plans, and social security benefits are protected from any legal action. The house of the defaulter can also be protected if the equity of the house is less than the Federal or State exemption. The same rule is applicable for car also.

Bankruptcy Chapter 7 though can be a good option to eliminate debt but it has its negative impacts also. So it is always advisable to have proper information before availing this option to get rid of the debts.