Chapter 7 Bankruptcy Rules
Chapter 7 bankruptcy rules are important to understand, even if you opt to file a Chapter 13 bankruptcy. While a Chapter 7 bankruptcy is known as a “liquidation” bankruptcy and may eliminate most unsecured debt, a Chapter 13 bankruptcy reorganizes debt into a single payment plan. Chapter 7 bankruptcy rules enables debtors to determine who qualifies, how to file a Chapter 7 bankruptcy and what debt may be discharged by a Chapter 7 bankruptcy.
Qualifying for a Chapter 7 bankruptcy
Perhaps one of the most important bankruptcy rules is the one that determines eligibility based on income. In order for you to file a Chapter 7 bankruptcy, your income level must fall on or under the median income for the state in which you reside. If you income is more than the median income for your state, you will be required to take a “means test” to determine your eligibility to file a Chapter 7 bankruptcy. Another important Chapter 7 bankruptcy rule is to determine what debts can be eliminated by a Chapter 7 bankruptcy. If you do not qualify for a Chapter 7 bankruptcy based on the income criteria or in terms of what debt you, you may file for a Chapter 13 bankruptcy.
Other Chapter 7 bankruptcy rules that may prohibit a filer from filing a Chapter 7 bankruptcy include:
- If you received a discharge in a previous Chapter 7 filing within the past eight years.
- If you received a discharge is a Chapter 13 case within the past six years.
- If your income, expenses and debt owed allow you to file a Chapter 13 bankruptcy.
- If there was any attempt to defraud the bankruptcy court or creditors
- If you did not fulfill the credit counseling requirements.
How To File A Chapter 7 Bankruptcy
Before filing your bankruptcy petition with the Court, you have to attend a credit counseling course with an agency that is approved by the United States Trustee. You are also required to provide information pertaining to your debt, income, expenses, as well as a list of exempt property. Exempt property refers to those assets that a debtor is permitted to keep according to Chapter 7 bankruptcy rules.
The 341 Creditors Meeting
Once a debtor has completed and submitted all the required paperwork for a Chapter 7 bankruptcy, the trustee will call a creditors meeting. During this meeting the trustee will review your paperwork and ask you questions about your bankruptcy case. If you do not attend the meeting, the Trustee may begin a motion to dismiss your case.
Chapter 7 Bankruptcy Discharge
A few months following the creditors meeting, the bankruptcy court will hold a discharge hearing. Any unsecured debt is discharged. Secured debt is handled in a different manner.
Chapter 7 bankruptcy rules dictate that the following debts will not be discharged:
- Debts incurred by fraudulent means.
- Tex debt, unless very strict criteria is met.
- Student loans are only discharged if the debtor can prove that undue hardship exists.
Once a debt is discharged, a creditor may no longer seek payment.