An Overview of Chapter 7 Bankruptcy
Learn how Chapter 7 bankruptcy works.
Chapter 7 bankruptcy is sometimes called "liquidation" bankruptcy -- it cancels your debts, but you might have to let the bankruptcy court liquidate (sell) some of your property for the benefit of your creditors. ("Chapter 7" refers to the chapter of the federal Bankruptcy Code that contains the bankruptcy law.)
Bankruptcy Costs in Time and Money
The whole Chapter 7 bankruptcy process takes about four to six months, costs $299 in filing and administrative fees, and commonly requires only one trip to the courthouse.
You must also complete credit counseling with an agency approved by the United States Trustee. (For a list of approved agencies in each state, go to the Trustee's website, www.usdoj.gov/ust, and click "Credit Counseling and Debtor Education.")
Who Can File
You won't be able to use Chapter 7 if you already received a bankruptcy discharge in the last six to eight years (depending which type of bankruptcy you filed) or if, based on your income, expenses, and debt burden, you could feasibly complete a Chapter 13 repayment plan. (For more information on these eligibility requirements, see Who Can File for Chapter 7 Bankruptcy.)
Bankruptcy Forms
To file for bankruptcy, you fill out a petition and a number of other forms and file them with the bankruptcy court in your area. Basically, the forms ask you to describe:
- your property
- your current income and monthly living expenses
- your debts
- property you claim the law allows you to keep through the bankruptcy process (called "exempt property") -- most states let you keep some equity in your home, clothing, household furnishings, Social Security payments you haven't spent, and other necessities such as a car and the tools of your trade.
- property you owned and money you spent during the previous two years, and
- property you sold or gave away during the previous two years.
You'll find step-by-step instructions for filling out all of the required forms in How to File for Chapter 7 Bankruptcy, by Stephen Elias, Albin Renauer, and Robin Leonard (Nolo).
|
|
