Serious heed should be given when making a bankruptcy claim as there is so much to consider. Not least of those considerations is which type of bankruptcy that one should apply for. The main two types of bankruptcy claim are Chapter 7 and Chapter 13 but for the purposes of this article I am going to focus solely on Chapter 7 information.
Essentially, a Chapter 7 bankruptcy is a means of liquidating most if not all of one’s debts. The bankruptcy law states that an individual must apply for a means test to see if he/she will qualify to make a bankruptcy claim under Chapter 7. The means test itself centers round one’s mean income for a six month period in advance of making a claim. Depending on the outcome of this means test, one will either qualify or will have to be further assessed to determine suitability to claim. Generally, if their mean monthly income is less than the state average the individual may be considered to file a bankruptcy petition under Chapter 7. If not, they will be further assessed.
The means test is not the only factor that determines one’s ability to apply. If the individual has made a previous application for bankruptcy, they must have complied with the bankruptcy courts terms and have been present at the court when required. Failure to have been present annuls one’s ‘right’ to apply for a Chapter 7 bankruptcy. Another very important factor is that the applicant must have attended a credit counseling course prior to filing bankruptcy. Only when all of these terms have been satisfied will the Chapter 7 bankruptcy petition proceed.
Unlike a Chapter 13 bankruptcy where a structured repayment plan is drawn up in order to eventually clear the debt(s) this does not happen with a Chapter 7 bankruptcy. Most, if not all of one’s debts will be liquidated – any assets that are considered as being non-exempt (you are not allowed to keep) will be sold and the proceeds distributed among one’s creditors. It will be the role of the trustee who has been appointed by the bankruptcy court to take charge of this.