A simple grounding in the fundamentals of bankruptcy is necessary for anyone who thinks they might have to file bankruptcy in the near future. Even if you retain the most successful bankruptcy lawyer in the country it's still important that you teach yourself on a few bankruptcy basics before going into that initial consultation.
When it comes to consumer-filed bankruptcy in the U.S., Chapter 7 bankruptcy is one of really only two choices to choose from. It is the most common and most sought after type of bankruptcy. Here are a few basics to take note of:
Chapter 7 is also referred to as "straight bankruptcy" or "liquidation."
A court-appointed trustee gathers all the debtor's non-exempt assets and liquidates them.
The proceeds are used to pay off the debtor's creditors, starting with secured lenders and then working down the list.
After about four to six months, all the debtor's dischargeable debts are legally absolved.
NOTE: In an attempt to control the influx of successful Chapter 7 bankruptcy filings, the federal government passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005. This act made it more difficult to file Chapter 7 by placing strict eligibility requirements on it in the forms of a "means examination."
Learn More About Chapter 7 Bankruptcy Today
In spite of the BAPCPA, Chapter 7 bankruptcy filings are still being successfully filed by consumers all over the country. There is a lot more to know about Chapter 7 than what may be learned by a few bulleted points. It is best to take your most specific and pertinent questions to a licensed bankruptcy lawyer in your area. He or she will be able to look at your case and tell you how federal and state bankruptcy laws will see your bankruptcy filing.
