Chapter 7 Bankruptcy
Bad Debt Consolidation by splinder
Filed under Bankruptcy
Chapter 7 bankruptcy, also called straight bankruptcy, is a liquidation process aiming to relieve a debtor from further financial obligations. It provides an opportunity for a fresh start. An individual, business entity, cooperative and partnership can file for bankruptcy under Chapter 7.[br]
How Chapter 7 Bankruptcy Works
A Chapter 7 bankruptcy case proceeding begins with filing a petition. The debtor can file a bankruptcy petition with the local court serving the area where they reside or hold assets. In the petition, debtor has to declare the following items:
- Assets and liabilities.
- Financial statement approved by the bank.
- Schedule of income and expenditures.
- Schedule of existing contracts and unexpired leases
For individuals with consumer debts, the following documents need to be attached:
- Certificate of credit counseling in previous months.
- Proof of any debt repayment plan developed thru counseling.
- Financial statement declaring net income and an expected rise in salary, if any.
- Husband and wife can file for bankruptcy jointly or individually.
After paying all the respective fees ($245 as case filing fee, $39 as administrative fee, and $15 as trustee surcharge, as in 2009), the applicant can fill in a bankruptcy form. The debtor has to provide the following information in the form:
- List of all the creditors along with their claim amount.
- Debtor’s sources of income.
- List of the entire debtor’s property.
- Classified list of all expenses (food, clothing, transportation, medicine and taxes).[br]
Even if bankruptcy is filed individually, the debtor has to provide relative information about their spouse as well. Once the petition has been filed, most collection activities stop automatically. The court sends a notice to the creditors, regarding their petition. The court also appoints trustees for the case. Within a stipulated time period, meetings are organized among trustees, creditors and debtor.
After evaluating the financial condition of the applicant, the trustees transfer all the non-exempt assets to a consolidated estate. The primary role of trustees is to sell the estate’s assets to maximize return for the creditor. Once the trustees complete their proceedings, a discharge order is issued in the name of debtor. This releases the debtor from all the financial obligations.