What is Chapter 7?

Posted By: Asim Mohammed
According to the United States Bankruptcy Code there are different “chapters” to file under, chapter 7 and chapter 11 and chapter 13. People have always heard of the chapter 11 on the news for when corporations or businesses are in trouble. One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a fresh start. One of the most common forms of bankruptcy is chapter 7. Chapter 7 governs the process of liquidation under the bankruptcy laws of the United States. Under chapter 7, the bankruptcy trustee will gather and sell the debtor’s assets and uses the proceeds of such assets to pay creditors in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. Also, filing under chapter 7 may result in a loss of property. In order to qualify under chapter 7, debtor may be an individual, a partnership, or a corporation or other business entity. Chapter 7 has different laws for businesses filing to individuals filing. There is a certain process that requires someone to fill out forms in court to people preparing the bankruptcy proceedings and going through the court system.




http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter7.html


http://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_States_Code


http://www.investopedia.com/ask/answers/190.asp

Are you Eligible to file for Chapter 7 Bankruptcy?

By Madeleine Brooks

What is Chapter 7 Bankruptcy? For individual persons, Chapter 7 Bankruptcy allows you to liquidate your assets. For a business, Chapter 7 is when the business is heavily in debt and cannot pay off its creditors. As a result, the business must liquidate its assets and dissolve the operations of the business. Chapter 7 Bankruptcy is the most common filing in the United States.

There are eligibility rules for individuals filing for bankruptcy. The test measures your “current monthly income” against a median income for a family of the same size in your state. The current monthly income is an average of the income you bring in over the last six months. If your current monthly income is less than or equal to the median income, you are eligible to file for Chapter 7 bankruptcy.

If your current monthly income is more than the median income, you must pass the “means test”. The objective of a “means test” is to determine if you have enough disposable income after deducting allowed expenses and required debt payments. This is for you to be able to repay a part of your debts over a five-year time frame. Click this link and you will be able to use a “means test calculator” to see if you are qualified to file for Chapter 7.

Sources:

"Chapter 7, Title 11, United States Code." Wikipedia. 19 Jan. 2009. 24 Jan. 2009 .

"Nolo's Bankruptcy Means Test Calculator." Nolo. 24 Jan. 2009.

"Who Can File for Chapter 7 Bankruptcy?" Nolo. 24 Jan. 2009.