Chapter 7 Bankruptcy- Who's Eligible?

2007-03-08 10:33:40

( Legal )



Chapter 7 bankruptcy is one of many kinds of bankruptcy that can be filed. Either way, bankruptcy is always a difficult and arduous process that must be approached with utmost caution. Even if you are at the end of the line, bankruptcy should only be regarded as a last resort, because this could ruin your credit history and ratings for years to come.

Chapter 7 bankruptcy refers to the bankruptcy of a person, partnership or corporation under certain eligibility requirements. It is synonymous with liquidation, since it requires you to sell off all possible assets so that you can have available cash at hand. While your debts may be cancelled, the money that you earn from selling has to be given to your creditors.

One advantage of chapter 7 bankruptcy is that it is fairly easy to file, usually involving only one trip to the courthouse. It usually takes place over a span of four to six months, depending on the circumstances.

Chapter 7 bankruptcy laws are still subject to the decision of the court since if they decide that you have enough disposable income, then you will have to file chapter 13 bankruptcy instead. Your current monthly income has to be compared to the median family income in your state before you are allowed to file for chapter 7 bankruptcy but if you are a disabled veterans with debts from medical reasons, then you will have no eligibility problems.

Chapter 13 bankruptcy stipulates that a repayment plan must be set in place. If your monthly income is more than the median income, then you move on to the means test. The means test calculates for expenses and debt payments over a prescribed period of time, usually about five years. If the court finds that you have enough disposable income, then you will be denied a chapter 7 bankruptcy.


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