You have probably heard about the two major "chapters" for personal bankruptcy.
They are Chapter 7 and Chapter 13.
Let's talk about Chapter 7 today; just what is it? Well, it is basically a way for individuals to wipe out their debts while protecting themselves from creditors.
The reason it is called Chapter 7 is simply because that's the specific provision in the Bankruptcy Code.
Importantly, you may have read that Chapter 7 is also called "liquidation bankruptcy".
It is true that if a corporation files Chapter 7, then it will be forced to liquidate all its assets.
Individuals however in the vast majority of cases do not have to liquidate their assets, because they are entitled to "exempt" or protect their personal assets.
The amount of assets that you are entitled to protect differs from State to State.
In my experience in Pennsylvania, the majority of individuals filing Chapter 7 protect all of their assets.
So then, how does Chapter 7 work? Basically, someone filing Chapter 7 should expect to obtain Pre-Bankruptcy Counseling prior to filing their case.
This is a 30-45 minute survey of their current income, household expenses and overall debts.
This can be done over the phone with a court-approved agency.
The next step is to meet with your attorney to assist in the preparation and filing of the bankruptcy petition, schedules and statements.
This set of documents is usually about 50 pages long and will itemize your assets, your debts, income, expenses, as well as a variety of other financial questions.
The Chapter 7 petition is quite detailed, and you will have to sign it under oath.
Once your case is filed, then there are two remaining steps.
You must complete a two-hour Financial Management class.
This class is done either online or in person and the subject matter is household budgeting and financial management.
Last, you must attend your Meeting of Creditors, which is the hearing in your case.
For the majority of Chapter 7 filers, there will be no creditors attending.
Instead, a representative from the Bankruptcy Court known as the Trustee will ask you questions concerning your petition and schedules.
There you have it-Chapter 7 in a nutshell.
From start to finish, most Chapter 7 cases take about 4 to 5 months to complete.
They are Chapter 7 and Chapter 13.
Let's talk about Chapter 7 today; just what is it? Well, it is basically a way for individuals to wipe out their debts while protecting themselves from creditors.
The reason it is called Chapter 7 is simply because that's the specific provision in the Bankruptcy Code.
Importantly, you may have read that Chapter 7 is also called "liquidation bankruptcy".
It is true that if a corporation files Chapter 7, then it will be forced to liquidate all its assets.
Individuals however in the vast majority of cases do not have to liquidate their assets, because they are entitled to "exempt" or protect their personal assets.
The amount of assets that you are entitled to protect differs from State to State.
In my experience in Pennsylvania, the majority of individuals filing Chapter 7 protect all of their assets.
So then, how does Chapter 7 work? Basically, someone filing Chapter 7 should expect to obtain Pre-Bankruptcy Counseling prior to filing their case.
This is a 30-45 minute survey of their current income, household expenses and overall debts.
This can be done over the phone with a court-approved agency.
The next step is to meet with your attorney to assist in the preparation and filing of the bankruptcy petition, schedules and statements.
This set of documents is usually about 50 pages long and will itemize your assets, your debts, income, expenses, as well as a variety of other financial questions.
The Chapter 7 petition is quite detailed, and you will have to sign it under oath.
Once your case is filed, then there are two remaining steps.
You must complete a two-hour Financial Management class.
This class is done either online or in person and the subject matter is household budgeting and financial management.
Last, you must attend your Meeting of Creditors, which is the hearing in your case.
For the majority of Chapter 7 filers, there will be no creditors attending.
Instead, a representative from the Bankruptcy Court known as the Trustee will ask you questions concerning your petition and schedules.
There you have it-Chapter 7 in a nutshell.
From start to finish, most Chapter 7 cases take about 4 to 5 months to complete.
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