Chapter 7 Bankruptcy Liquidation

Filing for bankruptcy liquidation is a scary and expensive process.  You know going in that you are going to lose most if not all of your assets, and that you will have to start from scratch... however, it will give you a fresh start. The options for filing bankruptcy have changed drastically, especially with regards to filing your own Chapter 7 bankruptcy without a lawyer, so, you may wonder, what are the options for filing for Chapter 7 bankruptcy, also known as total bankruptcy.

The Process of Filing for Bankruptcy

Due to a 2005 law change, the option of filing for your own bankruptcy is no longer allowed.  There is a new process for filing bankruptcy, which involves credit counseling and other avenues, and which treats bankruptcy as an end-result, with the goal of avoiding that end result by exploring other methods first:

• If you feel that you are considering bankruptcy, you will first have to attend credit counseling.  During these sessions, a counselor will examine your finances and see if there are areas where you can cut back, or where budgeting might help.  After your US Department of the Treasury approved credit counseling program is over, the decision will be made about whether or not bankruptcy is an option.
• If the credit counselor decides that bankruptcy is an option, they will look at your finances, your available assets and debts, and your income and ability to repay your debts. 
• If it appears that you could repay your debts if you were given a modified payment schedule and protection from your creditors, you will be directed into Chapter 13 bankruptcy. 
• Because Chapter 7 bankruptcy is total bankruptcy leading to very little debt being repaid and the majority being discharged, it is much harder to qualify for Chapter 7 bankruptcy since the 2005 law change.  Most bankruptcies now are at least attempted as Chapter 13 bankruptcies in order to insure that your creditors receive the maximum amount of money that they can under the law.

Qualifying for Chapter 7

To qualify for Chapter 7 bankruptcy, your median monthly income over the last six months must be less than the median monthly income in your geographic area for a household of your size.  If it is less, a further test will be subtracting certain items from your income to determine your disposable income. If your disposable monthly income after these deductions is less than $100, you will qualify for chapter 7.  If it is more than $166.67, you will not qualify for Chapter 7 and will have to file Chapter 13 bankruptcy if you wish to continue bankruptcy proceedings.

Getting Help

If you are curious about Chapter 7 bankruptcy or about the process for filing for a Chapter 7 bankruptcy, consult with an experienced bankruptcy attorney. Your attorney can provide you with more details about Chapter 7 bankruptcy litigation and can help guide you through the process of dealing with the courts, your trustee and your creditors.