Chapter 7 bankruptcy allows you to have "fresh start" by eliminating most kinds of unsecured debt. One of the main goals of Chapter 7 bankruptcy is to allow the debtor to obtain long-term rehabilitation.
To begin a Chapter 7 bankruptcy case, you must first complete a credit counseling session. After counseling, you are able to file for bankruptcy. In the application, you must compute your average income during the six months prior to your bankruptcy filing date and compare that figure to the median income in Colorado. If your income is less than the median, you can proceed with filing for Chapter 7 bankruptcy. If your income is above the median, you must pass the 'means test' to prove that a Chapter 13 repayment plan is not feasible. Eligibility for Chapter 7 bankruptcy became increasingly difficult after the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted in 2005. If the debtor is an individual whose debts are primarily consumer debts, the court must dismiss the Chapter 7 case if it finds that the granting of relief would be an abuse of Chapter 7. The means test provides for a finding of abuse if the debtor's income is higher than a specified portion of their debts. If you have disposable income sufficient to make payments under a Chapter 13 plan, then abuse of Chapter 7 filing is presumed.
Under Chapter 7 bankruptcy, a trustee is appointed who is responsible for collecting the debtor's nonexempt unencumbered assets, converting those assets into cash, and distributing to creditors who have proved claims in the estate. If the debtor is insolvent, most creditors will receive a small fraction of their claim if anything at all. The unpaid balance is discharged.
In a Chapter 7 bankruptcy, many types of debts are discharged or cancelled. Generally, most credit card, medical and legal debts are discharged. However, some debts are not discharged including court-imposed fines, back child support, debts owed under marital settlement agreements, student loans, and debts for personal injuries. When a debt is discharged, the creditor is forever barred from trying to collect it from you. Additionally, government entities may not discriminate against you simply because you have received a bankruptcy discharge. Our bankruptcy attorneys will assist you in every step of the bankruptcy process including filing the bankruptcy application, determining eligibility for Chapter 7, determining which of your debts are dischargeable, and providing advice regarding exemptions. |
