The ins and outs of Chapter 7 bankruptcy
It is important that people who are looking to file for Chapter 7 understand the process and what it entails.
Chapter 7 bankruptcy enables people to discharge a good portion of their debt, unlike Chapter 13 which simply reorganizes the debt into a structured repayment program. People who are overwhelmed with medical expenses, credit card debt and other bills may be able to start again with a clean financial slate once their bankruptcy is approved and finalized. In order to obtain this feeling of financial freedom, people must qualify for Chapter 7 and go through the entire bankruptcy process.
Qualifying for Chapter 7
Not everyone can file for Chapter 7. Only debtors who have an income that is below the state median may be eligible for this type of bankruptcy. The state median varies by state and changes depending on how many earners there are in the family. For example, New Jersey’s state median for people who are filing after November, 2016, is $62,149 for one earner, and $74,367 for two earners, according to The United States Department of Justice. Applicants must also pass the means test, which is a formula that uses the state median, as well as income and expenses to determine whether they are qualified for liquidation bankruptcy. In addition, applicants must take a credit counseling course prior to filing for bankruptcy and a debt relief course just after filing for Chapter 7.
Once all the paperwork is filed with the court, the trustee will issue an automatic stay. This prohibits the creditors involved in the case to contact the debtor by any means. Any pending lawsuits must also be dropped. It is crucial that the debtor list all creditors on their forms when submitting the paperwork, as only these creditors will be issued an automatic stay.
Meeting of creditors
Once all of the paperwork has been filed, the trustee who is appointed to the case will schedule a meeting of creditors. At this meeting, the trustee will make sure that the debtor understands everything that is entailed when filing for Chapter 7. The trustee may choose to repossess any unprotected party, sell it and disperse the funds to unpaid creditors involved in the case. Creditors are also invited to attend the meeting, and may ask questions regarding the debtors’ case.
Obtaining legal assistance
If you are considering bankruptcy as a way to gain financial freedom, you may want to speak with an attorney regarding the process. A lawyer in New Jersey may be helpful in answering your questions and discussing your options.