Chapter 7 bankruptcy is one of the most used, within the possibilities offered by the law. This option has some pros and cons, but overall it offers a good tool to make a fresh financial start for Americans. However, it is important to know the requirements that are established in order to apply for this article, since not everyone qualifies. Therefore, this time we will see who can declare Chapter 7 bankruptcy and what requirements must be met.
An important issue is that Chapter 7 bankruptcy involves the liquidation of assets to pay off debts. This means that when you file this appeal, much of the property you own will be sold, and the resulting money will be used to pay off creditors. For this reason, it is also known as liquidation bankruptcy. The good news is that you do not have to liquidate all the assets you own, since the law establishes certain exemptions. For example, you will be able to keep a house and a vehicle, as well as many of your personal items.
Requirements for who can file Chapter 7 bankruptcy
Now then, in addition to the bankruptcy process itself, what interests us is knowing the necessary requirements to apply for this bankruptcy article. The other existing option is Chapter 13 bankruptcy, which has different requirements and, therefore, may be the solution for people who do not qualify in Chapter 7. Chapter 13 is a bankruptcy that involves the renegotiation of the debts, unlike 7. Among the requirements, perhaps the most important difference is the means test. This seeks to prevent people with high incomes from using the resource of bankruptcy by chapter 7. Basically, the requirement is that the person seeking to declare bankruptcy has had an average income in the last six months that does not exceed the average of the state in which that lives. If you meet this requirement, you automatically pass the means test.
However, in some cases it happens that this requirement is not met but the person can still qualify. Who can file Chapter 7 bankruptcy is determined by criteria other than income. In this second instance, proof of income and monthly expenses of the person must be presented, so that they can be compared. If the person has income that exceeds expenses, then they are likely to qualify for Chapter 7 bankruptcy, although this issue will be determined by the bankruptcy authorities.
Another requirement established by law is the need for the applicant to undergo credit counseling under the tutelage of an authorized provider. This is intended to explain to the person the characteristics and consequences of the bankruptcy application, as well as to provide him with knowledge that improves his future decision-making capacity. In addition to this advice, the person must pay a fee for the presentation corresponding to the procedure. If the applicant’s income is low (does not exceed 150 percent of the poverty level), this fee may be waived.
Who can file Chapter 7 bankruptcy and who can’t
Continuing with the requirements for Chapter 7 bankruptcy, there are also some issues that prevent access to this procedure. An important question refers to the previous bankruptcy processes requested. A Chapter 7 bankruptcy petition filed within the last 8 years prevents that person from reapplying. In the case of chapter 13 bankruptcy, if the person has filed in the previous 6 years, then he cannot file for chapter 7 bankruptcy now.
What happens to properties in Chapter 7 bankruptcy
It should be taken into account that, once the chapter 7 bankruptcy has been filed and approved, a series of assets will be liquidated. Who can declare the bankruptcy of chapter 7 will have to dispose of a part of the possessions of him. These include: second homes and second vehicles, investments, bank accounts and cash, expensive musical instruments, works of art, and other luxury goods. On the other hand, another series of assets are exempt from liquidation: the main home, the vehicle (provided it does not exceed a certain amount), pensions and public benefits, household appliances, clothing and personal items such as some jewelry, compensation corresponding to agreements for personal injury, among others. Because they are exempt, these last assets will not be liquidated during bankruptcy.
Knowing all the details and particularities of bankruptcy proceedings can be extremely complex. In many cases, the requirements mean that the person does not have many options as to which item to drop. But in others, it is possible to accommodate the situation as appropriate. In addition, bankruptcy is not always the most effective solution, although it is true that it can represent an effective solution to financial problems and have the opportunity of a clean start.
Final Tips When Filing Chapter 7 Bankruptcy
In order to start a bankruptcy process safely and knowing all the consequences, the best advice is to have a lawyer specializing in the matter. Professional advice is essential, not only to understand the implications of the process, but also for it to come to fruition. During bankruptcy you will have to file documents and attend hearings where details are often of the utmost importance. Therefore, you cannot leave it to chance, and the best thing you can do is to be prepared.
Bankruptcy Attorney Miami, Michael J. Brooks has extensive experience and recognition advising bankruptcy cases, so moving your case forward will not be a problem. To find out who can declare Chapter 7 bankruptcy and if you can apply for it, do not hesitate to contact the best lawyer to make the best decision about his future.