Chapter 7 Bankruptcy
Bankruptcy is not something you should take lightly. This makes it important to understand it clearly. Asset liquidation is controlled by Chapter 7 of Title 11 in the US bankruptcy code. Nonexempt assets will be liquidated for the purpose of paying creditors by appointing a bankruptcy trustee. Remaining debts once the proceeds get exhausted are automatically discharged.
Eligibility requirements dictate the filing of Chapter 7. For instance, the debtor should not have any discharged Chapter 7 bankruptcy in the preceding 8 years. They should pass a means test as well.
Attorneys at SBEMP (Slovak, Baron, Empey, Murphy & Pinkney) law firm provides professional legal advice and services to clients in Palm Springs, Palm Desert, Rancho Mirage, Inland Empire, Orange County, Coachella Valley, Costa Mesa, San Diego, New Jersey, New York, and surrounding locations.
Overview of Chapter 7 Bankruptcy
The absolute priority rule in Chapter 7 bankruptcy stipulates the order by which debts get paid. Unsecured debt is segregated into categories or classes under this rule. Each class receives a certain payment priority. Secured debt refers to debt secured by collateral for reducing risk associated with lending.
Generally, unsecured priority debts, such as child support, tax debts, personal injury claims, and others are paid off first. The next in line for payment is secured debts. Finally, unsecured debt or nonpriority debts are paid off with the remaining amount from liquidated assets.
Nonpriority debts get paid on a pro-rata basis if there are not enough funds to pay all of them.
Process of Chapter 7 Bankruptcy
Counseling and Forms
Filers need to undergo credit counseling before they can begin the Chapter 7 bankruptcy process. This needs to be done within six months of filing bankruptcy. This step can be foregone if the district does not have an approved counseling agency. Several forms need to be completed by the applicant as well. This includes a court petition to begin the proceedings for Chapter 7 bankruptcy.
Meeting of Creditors and Trustee Appointment
An unbiased trustee will be appointed by the bankruptcy court for overseeing the entire process. Assets will be reviewed by them for determining the ones that can be liquidated. The trustee will schedule meetings with different creditors to validate their petitions.
Personal assets and finances of a debtor are reviewed by the bankruptcy trustee. The debtor can retain exempt property or the assets required for maintaining basic standards of living. All nonexempt property will be seized and liquidated. Each state has its own property exemption rules. However, in most cases, the debtor can keep their personal possessions, primary home, and car.
Remaining Debt Discharge
Remaining debts that cannot be paid for are discharged under Chapter 7 bankruptcy. Debtor in this case gets released from all personal liability. Creditors are not allowed to seek further restitution once the debt gets discharged under Chapter 7.
Ramifications of Chapter 7 Bankruptcy
Debtors need to be sure Chapter 7 bankruptcy is right for them since there are serious negative consequences to filing this bankruptcy. All bankruptcy documents should be kept safely since creditors can always attempt to recover debt even after they get discharged.
Lawyers at the SBEMP law firm serve clients from Palm Springs, Palm Desert, Rancho Mirage, Inland Empire, Orange County, Coachella Valley, Costa Mesa, San Diego, New Jersey, New York, and nearby locations for a range of legal practice areas.
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SBEMP LLP is a full service law firm with attorney offices in Palm Springs (Palm Desert, Inland Empire, Rancho Mirage, Indian Wells), CA; Indian Wells, CA; Costa Mesa (Orange County), CA; San Diego, CA; New Jersey, NJ; and New York, NY.
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