A Chapter 7 bankruptcy is the most commonly filed bankruptcy in the United States.
A Chapter 7 bankruptcy allows the debtor the opportunity stop a home foreclosure, stop collection actions against them and obtain a fresh start.
The Means Test
The means test is a test under the Bankruptcy Code which determines who qualifies to file a Chapter 7 bankruptcy. An individual must meet the means test eligibility before they can file a Chapter 7 bankruptcy. The means test deals with individual or family income and whether the income is too high to qualify under the means test. If an individual’s income is too high to file a Chapter 7 bankruptcy, they can still file a Chapter 13 bankruptcy. A Chapter 13 bankruptcy, however, is different from a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, there is no repayment plan. Under Chapter 13 bankruptcy a repayment plan. This repayment plan may not require you to pay 100 cents on the dollar. The repayment plan lasts between 3 to 5 years.
There are two types of debts in bankruptcy, dischargeable debts and non dischargeable debts. Dischargeable debts are debts that can be eliminated by filing a bankruptcy. Examples of dischargeable debts are medical bills, credit card bills, personal loans, car loans, bills owed to contractors, dentists and other individuals who provided services to you. Examples of debts which may not be dischargeable are most student loans, some types of taxes, child support, spousal maintenance payments, and fines by courts.
The Benefits of the Chapter 7 Bankruptcy Filing
Individuals who file a Chapter 7 bankruptcy who have no ability to repay their debts can eliminate their debts. Once the Chapter 7 bankruptcy process is complete, all non exempt debts are eliminated. Immediately after the bankruptcy is over, the individual who files the bankruptcy can start rebuilding their credit. It is not true if you file a bankruptcy you will never receive credit. Capitalism is based on people obtaining goods and services based on credit. The system is designed to allow you to obtain a fresh start and reestablish your credit.
Elliot S. Schlissel, Esq. has been practicing bankruptcy law for over 35 years. He is the managing partner of Schlissel DeCorpo LLP. The law firm represents debtors in foreclosure defense and helps debtors file bankruptcy cases and obtain mortgage modifications. They can be reached for a free consultation at 800-344-6431 or by e-mail at Elliot@sdnylaw.com.